Leave to proceed when a company is in liquidation – pre-court

Palace v RCR O’Donnell Griffin Pty Ltd (in liq) [2021] QCA 137

The appeal of Palace v RCR O’Donnell Griffin Pty Ltd (in liq) [2020] QSC 354 applied accepted legal principles but found the primary judge erred about factual matters and exercised the discretion in House v The King (1936) 55 CLR 499 at pp.504-505.

Section 500(2) of the Corporations Act 2001 (Cth) (Corporations Act) provides:

After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.”

It was accepted that in seeking leave to proceed against a company in liquidation under the Corporations Act that the matters referred to in QNI Resources Pty Ltd v Park (2016) 116 ACSR 321; [2016], QSC 222 per Bond J at 331–2 [45] to [51] applied.

As is common in constructions matters, there were related entities, several parties and subcontracts involved in the facts of the appellant’s claim for his injury. The first Notice of Claim (NOC) under PIPA was served on a related entity of the host employer and then on the respondent when the identity became known after the respondent under the Workers’ Compensation and Rehabilitation Act 2003 (WCRA) made disclosure of the relevant subcontract.

Section 14 of the Personal Injuries Proceedings Act 2002 (PIPA), while a significant reason for the primary judge’s reasoning, evaporated on appeal. There was no dispute in the appeal hearing that the test as articulated by Fryberg J in Interpacific Resorts (Australia) Pty Ltd v Austar Entertainment Pty Ltd [2005] 2 QdR 23 and Bridgeport Pty Ltd v Yelyruss Pty Ltd [2011] QSC 237 applied to s 14. The dispute was whether it should have applied because the appellant did not seek the order on the application hearing. Ultimately, the respondent conceded that if leave was granted under the Corporations Act because there was a question of apportionment to be determined at trial between the labour-hire company and host employer, then leave under s 14 of PIPA should be granted.

The quantum of the claim was considered at length on appeal by reference to copies of the sworn PIPA NOC and WCRA NOC attached to the appellant’s lawyer’s affidavit. The respondent on the application hearing objected to affidavit material other than by the deponent as hearsay. The primary judge considered rule 430(2) of the Uniform Civil Procedure Rules 1999 and allowed the affidavit material.

On the appeal, the respondent, while not objecting to the admissibility of the NOCS, submitted that little weight should be given to them. The Court found no reason not to give weight to the statutory declarations as contained in the NOCS and recited significant portions in coming to the conclusion that the appellant had stated the basis for the claim against the respondent and substantiated the damages sought.

The Court was not troubled by the issue of the deductibility after consideration of the NOCS. The Court resolved the outstanding issue by reference to the accepted principle that if there is an insurance policy indemnifying a company in liquidation, provided there is a substantial question to be tried in relation to the claim against a damages claim, it would sufficiently justify the grant of leave: see Oceanic Life Ltd v Insurance and Retirement Planning Services Pty Ltd (in liq) (1993) 11 ACSR 516 at 521; La Trobe Wholesale Finance Pty Ltd v KCRAM Pty Ltd (in liq) (No 1) [2012] FCA 1388 at [23].

The granting of leave was buffeted by the appellant accepting that any grant of leave should be subject to a condition that he would not seek to enforce any judgment he obtained without first obtaining the leave of the Court.

However, what remains unresolved from a procedural aspect is whether the pre-court regime under PIPA (and WCRA) is caught by the wording “other civil proceeding” in the Corporations Act. The appellant made the application in contemplation of an application under s 43 of PIPA, but not in conjunction.

If an application under s 14 of PIPA were required, it would trigger the Corporations Act. Similarly, under s 43 of PIPA. The Court did not determine the issue.

Unfortunately, if a respondent refuses to engage with PIPA or WCRA on the basis that leave under the Corporations Act is first required, it will require an application to resolve the issue.

David Cormack

Brisbane Barrister & Mediator

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