Zakrzewski v Rodgers

RESPONDENT/APPLICANT ON THE MOTION LEGAL REPRESENTATIVES: Mr J K Chippindall of counsel

SOLICITOR Mallesons Stephen Jaques SYDNEY.

JUDGMENT: - 5 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: PETERSON DATE: 13 SEPTEMBER 2002

Application under s106 of the Industrial Relations Act 1996.

1 On 15 August 2002 I made orders dismissing these proceedings with costs, on the motion of the respondent, in circumstances which will become clear hereafter; these are my reasons therefor. This is perhaps the last stage in a case history which brings to mind unavoidably the sorry tale in Bleak House by Charles Dickens. It has involved the dogged pursuit by Mr Zakrzewski of payment for work which he did through his company Network Painting and Decorating Pty Limited ('Network'), now dissolved, for a company also since dissolved, Desaro Design Interiors Pty Limited ('Desaro') and, he alleges, for and with the express authority of the provisional liquidator of Desaro, the respondent, Peter David Rodgers. As a result of the liquidation of Desaro, Network and thus Mr Zakrzewski received no return for the painting work he had undertaken on various projects while Desaro was in business. Mr Rodgers denies that the work was performed with his authority during the course of the liquidation of Desaro.

2 The substantive proceedings here involve an application filed under s106 of the Industrial Relations Act 1996 ('the Act'). The initiating summons was filed on 5 August 1998 and an amended summons was filed on 15 November 2000. It is crucial that the amended summons for relief, which seeks recovery of some $46,000 in respect of work done but not paid for, proceeds upon the ground that Mr Rodgers was provisional liquidator of Desaro.

3 The motion before the court is that the amended summons should now be dismissed in circumstances where the Supreme Court (Bergin J) has declined to grant Mr Zakrzewski leave to proceed with this application against Mr Rodgers and the New South Wales Court of Appeal has declined to grant Mr Zakrzewski leave to appeal from the judgment of Bergin J.

4 Before dealing with the issues which arise therefrom, it is appropriate that a short statement of the history of the litigation between the parties be made. Mr Zakrzewski was a director and employee of Network. Network undertook various painting projects on behalf of Desaro including work on a major contract won by Desaro to renovate St Martins Tower in York Street, Sydney.

5 In 1992 Desaro applied to the Federal Court to wind itself up, seeking the appointment of a provisional liquidator. On 6 March 1992 Mr Rodgers was so appointed and on 30 October 1992 the company was wound up.

6 On 7 September 1992 Network issued a Statement of Liquidated Claim in the Local Court against Mr Rodgers as provisional liquidator for Desaro. It sought $34,394.50 in respect of work done and materials provided by Network for the defendant at the defendant's request. A defence was filed to that matter on 6 October 1992 together with a cross claim of $4,848.00 said to be overpaid to Network by Desaro.

7 On 13 November 1992 Mr Rodgers obtained a default judgment on the cross claim which was later set aside by Beaumont J in the Federal Court. On 6 September 1993 Mr Rodgers, again as provisional liquidator for Desaro, sought an order winding up Network on the basis that it had failed to comply with the requirements of a statutory demand for the payment of $5,693.19. On 27 September 1993 the Supreme Court ordered that Network be wound up and that Christopher John Palmer be appointed liquidator. Subsequently, Network made an application to the Federal Court for leave to proceed in the Local Court against Mr Rodgers, again as provisional liquidator/liquidator of Desaro. Foster J granted that leave on 16 February 1996. An amended statement of liquidated claim was then filed in the Local Court by Network seeking $56,336.87. The date on which that proceeding was commenced is unclear but Mr Rodgers filed a defence to the amended statement of claim on 9 July 1996.

8 The amended statement of liquidated claim in the Local Court pleaded that Mr Rodgers' agent, Paul Leroy, made an oral agreement with Mr Zakrzewski, a term of which was that Mr Rodgers would guarantee the payment of Mr Zakrzewski's invoices for work done to Mr Rodgers' order. It also alleged breaches of the Fair Trading Act 1987 and claimed damages thereunder.

9 That came before the Local Court on 6 November 1996, when, by agreement, Magistrate R Dive heard a preliminary question whether Mr Rodgers had by his agent, Mr Leroy, given a personal guarantee to Network. Mr Dive found against Mr Zakrzewski on that issue.

10 On 8 October 1997 an application was filed in the Federal Court by Mr Zakrzewski but in the name of Network under s536 of the Corporations Law, which permits an inquiry to be ordered where issues concerning misconduct by officers of the court, including liquidators, arise. Mr Palmer, liquidator of Network, appeared in the matters to inform the court that the proceedings had been initiated without his authority and he consented to their dismissal. Beaumont J dismissed the application with costs. Mr Zakrzewski then sought to have his name substituted for Network which was permitted by Madgwick J in the Federal Court.

11 The next step in the saga is that these s106 proceedings were commenced on 6 August 1998. On 3 March 1999 the respondent filed an application for a stay which was heard by Kavanagh J on 8 April 1999. Her Honour ordered that the proceedings be stayed, granted leave to file an amended summons for relief and directed that an application be made to the Federal Court for leave to proceed against the respondents. On 11 March 1999 the Federal Court ordered Mr Zakrzewski to pay Mr Rodgers the sum of $17,292.44 pursuant to the costs order made by Beaumont J on 21 April 1998.

12 On 8 April 1999 Mr Zakrzewski filed an application in the Federal Court for leave to proceed against Mr Rodgers.

13 On 12 April 1999 Mr Zakrzewski was served with a Bankruptcy Notice for the amount relating to costs. On 30 April 1990 Mr Zakrzewski sought an order to set aside the Bankruptcy Notice on the ground that he had a counter claim or cross demand equal to or exceeding the amount claimed in the Bankruptcy Notice. On 23 August 2000 Madgwick J ordered that the Bankruptcy Notice be set aside with Mr Rodgers to pay Mr Zakrzewski's costs.

14 Mr Zakrzewski's application for leave to proceed against Mr Rodgers was heard by Madgwick J on 27 May 1999 and adjourned to 20 September 1999. Between those dates the High Court decided Re Wakim; Ex parte McNally (1999) 198 CLR 511, the effect of which was to cause the Federal Court to no longer exercise power in Corporations Law matters on a cross-vesting basis.

15 As earlier noted, the amended summons for relief in the s106 proceedings was filed on 15 November 2000 and came before Kavanagh J on 20 November 2000 at which time Mr Zakrzewski was directed to apply to the Supreme Court for leave to proceed against Mr Rodgers. Those proceedings were commenced in the Supreme Court on 18 December 2000. That matter came before Bergin J on 20 April 2001 when her Honour gave an extempore judgment declining leave to proceed. Her Honour noted that the application sought leave to continue proceedings against Mr Rodgers in his capacity as court-appointed liquidator of Desaro. Her Honour dealt with the absence of Desaro and Network, both of which have ceased to exist.

16 Before refusing leave, her Honour's judgment stated:

Mr Watts in reply submitted that the plaintiff should not have to go to all the trouble of having to reinstate the companies because of what appears to be the unconscionable arrangements that were made whereby the plaintiff performed work for which he was not paid. It is the plaintiff who chooses his jurisdiction and it is the plaintiff who has chosen his cause of action. Properly advised, the plaintiff may have causes of action that are available to him which may not have the difficulties that I see that he has in this proceeding. I do not understand the Industrial Relations legislation to permit the Commission to make an order under section 106(1) declaring void a contract between parties who are not parties to the proceedings.

Although Mr Watts kindly passed on some views of the pleader having been surprised that the point was even raised, no authority has been cited in support. I may say it does seem elementary that parties to a contract, the subject of the proceedings, should be joined. However, it is apparent that some practitioners in the jurisdiction do not regard it as necessary.

In this case, the court is asked to grant leave and must be satisfied that the proceedings in respect of which leave is sought are properly constituted. I am not satisfied that they are and Mr Watts, anticipating the way that I may be thinking, submitted if I was against him I should make an order granting leave subject to the joinder of those parties. That also is something that I will not do. I do not know whether an application to re-register the entities, Desaro and Network will be successful. Until that position is known, I would not exercise my discretion to grant leave in the circumstances.

17 On 7 December 2001 the Court of Appeal declined leave to appeal against that judgment. Priestley JA on behalf of the Court of Appeal comprising himself and Heydon JA stated the view of the Court as being "that your chances of success in an appeal if leave were granted to you to appeal are so small that it is inappropriate to grant you that leave. Further, we are of the view that Bergin J's decision was correct and there is thus no point in granting leave to appeal against it". The Court of Appeal ordered that Mr Zakrzewski's application be dismissed with costs.

18 In her Honour's judgment on the application for leave, Bergin J referred to the judgment of Santow J in Mamone and 1 ors v Pantzer [2001] NSWSC 26 revised (unreported) in which his Honour dealt with the Court's power to give leave to proceed against a liquidator, particularly after the liquidation tasks had been completed. Mr Chippindall referred me to that judgment and also the cases there sited, namely Re Magic Aust. Pty Limited (In Liquidation) (1992) 10 ACLC 929 and Re Siromath Pty Limited (1991) 9 ACLC 1,580 in which McLelland J said: It is well established that at least unless the Court's leave has been obtained, 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, whether right or wrong. The proper remedy for anyone aggrieved by his conduct is to apply to the Court in the action in which he was appointed". (See Re Maidstone Palace of Varieties (1909) 2 Ch 283 at 286 applying Aston v Heron (1834) 2 My & K 390; 39 ER 993; cf. Re Hutton (1969) 2 Ch 201).

An application to the Court to enforce this principle is properly made, as it has been in the present case, by notice of motion in the proceedings in which the relevant officer was appointed, in this case the winding up proceedings. In the circumstances it is appropriate that this Court take whatever steps are open to it to protect its own officers, and for this purpose to confirm service of the notices of motion.

19 The third case referred to by Santow J was Sydlow Pty Ltd (In Liquidation) v T G Kotselas Pty Ltd and Others (1996) 65 FCR 234 per Tamberlin J.

20 In Mamone v Pantzer, Santow J summarised the principles relevant to a consideration of an application for leave in the following way: The applicable principles and their public purpose which underlie the requirement that a prospective litigant must obtain leave to sue a court appointed liquidator can be stated in the following propositions.

(i) The Court will protect its officer from spurious or vexatious litigation: Re Siromath Pty Ltd (No.3) (1991) 25 NSWLR 25 at 29; Re Magic Aust. Pty Ltd (in liq) (1992) 10 ACLC 929 at 932; and

(ii) The Court will protect the integrity of the winding up process to ensure no wrongful interference with that process: Sydlow Pty Ltd (in liq) v T G Kotselas Pty Ltd & Ors (1996) 65 FCR 234 at 241; 144 ALR 159 at 165-6.

To those ends, a prospective litigant must, to obtain the necessary leave, demonstrate its claim has sufficient merit. What is sufficient is affected by the circumstances and timing in which that leave is sought. Moreover courts recognise that liquidators, like administrators, often have to make decisions on the run; to expect perfection in those circumstances is unrealistic. In Sydlow (supra) Tamberlin J stated:

"The discretionary power of the court to grant leave must be exercised having regard to all the circumstances of the particular cases and bearing in mind the need to protect the integrity of its process. It does not necessarily follow that, in order to obtain leave, a prima facie case must be demonstrated. There is no specific threshold appropriate in all cases, however there must be more than mere assertion. The court's discretion may be exercised on many grounds, including, but not limited to, the sufficiency of the evidence adduced, as to the prospects of success of the action on the application for leave." (at page 242; 165). I would adopt the reasoning of Tamberlin J in Sydlow , recognising that he was at pains to avoid laying down a rigid test for when the court should refuse leave.

21 In the proceedings in this Commission Mr Zakrzewski seeks to invoke an alleged statutory power to confer upon him a remedy against Mr Rodgers in his role as court appointed provisional liquidator. In the course of hearing Mr Rodgers' motion for dismissal, Mr Zakrzewski, who appeared in his own right, submitted that there had been a failure, particularly by those representing him at an earlier stage, to appreciate that the actions of Mr Rodgers with which he was concerned were not in his role as provisional liquidator but acting in some personal capacity. As I have earlier noted, the proceedings are not founded upon that basis but on a contrary one.

22 While this Court's exercise of its jurisdiction is not subject directly to any order of the Supreme Court, the applicant's ability to maintain the proceedings depends upon his obtaining leave of the Supreme Court, in the absence of which, were the applicant to persist, he would become exposed to an injunction restraining him from so doing. In Re Magic Australia Pty Limited McLelland J put the matter this way: So far as the first of these matters is concerned, proceedings cannot properly be brought against a Court-appointed liquidator personally with reference to the duties of his office except by application in the winding up proceedings, or pursuant to leave of the Court which is normally to be sought in an application made in the winding up proceedings, and in a proper case the Court will protect its officer, the liquidator, from being subjected to proceedings brought without its leave, by the grant of an appropriate injunction, or by staying the proceedings (See Re Siromath (1991) 9 ACLC 1,580 and Re Siromath (No 3) (1991) 9 ACLC 1,587 and cases there cited).

23 Of course, in the absence of an injunction, knowledge that the Supreme Court, including the Court of Appeal, has declined appropriate leave is sufficient for this court to stay its hand in the s106 proceedings. This Court cannot lend itself to a procedure inconsistent with these stated requirements.

24 Section 162(2)(h) of the Act empowers the Commission to "dismiss at any stage any proceedings before it if it considers the proceedings are frivolous or vexatious". I consider it would be appropriate to view any attempt to maintain these proceedings in the circumstances which I have described as frivolous or vexatious within the meaning of that section and, accordingly, I find that the Commission is empowered to dismiss the motion in the present circumstances.

25 In these circumstances the only available order is that the applicant on the motion should succeed; the proceedings under s106 of the Act must be dismissed with costs.

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.