Nilsen (SA) Pty Ltd v Gerrard & Anor [2011] NTSC 93

 

PARTIES:                                         NILSEN (SA) PTY LTD

                                                         (ACN 007 873 387)

 

                                                         v

 

                                                         GERRARD, Brian Arthur

 

                                                         AND:

 

                                                         TRANS AUSTRALIAN CONSTRUCTIONS PTY LTD (In Liquidation)

                                                         (ACN 001 325 980)

 

TITLE OF COURT:                           SUPREME COURT OF THE NORTHERN TERRITORY

 

JURISDICTION:                               SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION

 

FILE NO:                                          31 of 2011 (21108495)

 

DELIVERED:                                   18 November 2011

 

HEARING DATE:                             25 August 2011

 

JUDGMENT OF:                              BARR J

 

Tepko Pty Ltd and others v Water Board (2001) 206 CLR 1

 

REPRESENTATION:

 

Counsel:

    Plaintiff:                                      A Wyvill SC

    First Defendant:                           P McQueen

    Second Defendant:                        D Robinson SC

 

Solicitors:

    Plaintiff:                                      De Silva Hebron

    First Defendant:                           McQueens

    Second Defendant:                        Clayton Utz

 

Judgment category classification:    B

Judgment ID Number:                       Bar1111

Number of pages:                             6


IN THE SUPREME COURT

OF THE NORTHERN TERRITORY

OF AUSTRALIA

AT DARWIN

 

Nilsen (SA) Pty Ltd v Gerrard & Anor [2011] NTSC 93

No 31 of 2011 (21108495)

 

 

                                                     BETWEEN:

 

                                                     NILSEN (SA) PTY LTD

                                                     (ACN 007 873 387)

                                                         Plaintiff

 

                                                     AND:

 

                                                     BRIAN ARTHUR GERRARD

                                                         First Defendant

 

                                                     AND:

 

                                                     TRANS AUSTRALIAN CONSTRUCTIONS PTY LTD (In Liquidation)

                                                     (ACN 001 325 980)

                                                         Second Defendant

 

CORAM:     BARR J

 

REASONS FOR DECISION

 

(Delivered 18 November 2011)

 

[1]       On 25 March 2011, I made orders on the plaintiff’s application pursuant to s 500(2) Corporations Law granting leave to the plaintiff to commence the within proceeding against the second defendant and, subject to conditions, to maintain the proceeding for the purpose of litigating the following two issues: (1) whether the plaintiff is a secured creditor of the second defendant as a result of the assignment by the first defendant by deed dated 24 October 2008 of a charge created in 2004; and (2) whether the plaintiff is otherwise a secured creditor of the second defendant.

[2]       The leave granted was restricted to proceeding to the stage where pleadings had closed and particulars exchanged.  Further leave of the court would be required to continue the proceeding beyond that stage. 

[3]       At the time of making the orders, I expressed my expectation that the issues in respect of which leave had been granted could be disposed of expeditiously and economically by a trial on agreed facts or with some limited affidavit evidence.  I indicated that I would consider such matters at the time further leave of the court were sought to continue the proceeding beyond the stage permitted.

[4]       In my oral decision delivered on 25 March 2011, I explained that I had not granted leave to the plaintiff to pursue all of the causes of action pleaded in the Statement of Claim because I was of the view that, once the issue of the plaintiff’s status as a secured creditor was resolved, the quantum of the plaintiff’s claims should be determined by the statutory process for dealing with proofs of debt; alternatively they could be the subject of conciliation or mediation before being litigated. 

[5]       This matter came back before me for directions on 25 August 2011, at which time I heard submissions and argument from senior counsel representing the plaintiff and second defendant and from counsel representing the first defendant.

[6]       The written and oral submissions of the parties at the directions hearing indicated to me the artificiality of the orders made by me in March this year.  I now doubt that the issues in respect of which leave was granted can be disposed of expeditiously and economically, by a trial on agreed facts or with limited affidavit evidence.  This applies particularly to the second issue in respect of which leave was granted: the plaintiff’s alternative case that, if it is not a secured creditor as a result of the assignment, then it would be entitled by subrogation to claim the benefit of the charge arguably still held by the first defendant consequent upon the failed assignment. 

[7]       A second aspect of artificiality emerged at the recent directions hearing.  In March this year, whether through failing to inquire adequately or because the issue had not arisen at that stage, I understood that there was no dispute or no significant dispute in relation to the quantum of the plaintiff’s claims.  (The amount claimed by the plaintiff is in excess of $1.2 million, and possibly significantly more with interest included.)  I now understand that the provable quantum of the plaintiff’s invoices is in issue.  The first defendant contends that the ultimate account between the second defendant and the plaintiff is in favour of the second defendant; that is, not only is the second defendant not indebted to the plaintiff, but the plaintiff is indebted to the second defendant.  The liquidator of the second defendant does not necessarily agree with the first defendant's contention in this respect, but has not yet made a decision as to the amount of the plaintiff’s claim which he is prepared to admit.  I intend no criticism of the liquidator in summarising his position in that way.  No formal process for the submission of a proof of debt by the plaintiff has yet taken place, because the plaintiff fears that submission of such proof would result in the unintended loss of its claimed security.

[8]       In the circumstances, I doubt the wisdom of confining the plaintiff and the second defendant to the issues in respect of which I previously granted leave.  The utility of a trial restricted to those issues is questionable.[1]  The amount of the plaintiff’s claim is unresolved, and very likely to be disputed in whole or in part.  Even if it were possible for the plaintiff to submit a proof of debt to the liquidator without thereby risking its claimed security, there would probably still be litigation in this Court between the plaintiff and the liquidator given the real possibility that the plaintiff’s claim would not be admitted or not admitted in full.

[9]       There is the added anomaly that the plaintiff may litigate all issues fully against the first defendant, without any requirement for leave, which further highlights the artificiality I referred to above.  

[10]     I have therefore decided that the plaintiff should be given leave to proceed against the second defendant without restrictions or conditions.  The plaintiff appears to have a good claim for monies outstanding and payable, but unpaid.  The plaintiff also appears to have at least an arguable case that it is a secured creditor.  The litigation serves the valid purpose that it will not only determine the quantum of the plaintiff's claim, but also whether the plaintiff is a secured creditor and, if so, the extent or quantum of its security.  Moreover, the litigation will determine these issues in a manner which binds all three parties to the litigation. 

[11]      Accordingly, the plaintiff should be permitted to fully litigate its case against the second defendant. 

[12]     In relation to my concern for the preservation of the second defendant’s funds for the benefit of all its creditors, and the effect which the costs of this litigation might have on the second defendant’s overall position, I note the affidavit of Matthew Charles Garraway sworn 27 September 2011 in relation to the plaintiff’s financial position and its ability to pay costs if unsuccessful.  If the plaintiff’s asset position became such that the second defendant were concerned that it did not have sufficient costs protection, then the second defendant would be at liberty to make an application for security for costs in the ordinary way.

[13]     Subject to any further submissions of the parties consistent with the decision explained in these reasons, I would propose to make orders as follows:-

(1)        Pursuant to s 500(2) Corporations Law the plaintiff have leave to continue this proceeding against the second defendant in all respects pleaded in the Statement of Claim.

(2)        The defendants file and serve amended Defences and, if so minded, Counterclaims and/or or Cross Claims, on or before 22 December 2011.

(3)        The plaintiff and the defendants file and serve any Replies and Defences to Counterclaims or Defences to Cross Claims on or before 31 January 2012.

(4)        Costs of the directions hearing on 25 August 2011 be costs in the cause.

(5)        Matter to be listed for a directions hearing as soon as practicable after 14 February 2012.

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[1] See discussion in Tepko Pty Ltd and Others v Water Board [2001] HCA 19; (2001) 206 CLR 1 at [168] – [171] per Kirby and Callinan JJ.