Magnetic Island Cruise Corporation Pty Ltd v Reefseeker Cruises Pty Ltd
[2007] QDC 175
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- Unreported Judgment
- Magnetic Island Cruise Corporation Pty Ltd v Reefseeker Cruises Pty Ltd[2007] QDC 175
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Magnetic Island Cruise Corporation Pty Ltd v Reefseeker Cruises Pty Ltd[2007] QDC 175
Magnetic Island Cruise Corporation Pty Ltd v Reefseeker Cruises Pty Ltd[2007] QDC 175
DISTRICT COURT OF QUEENSLAND
CITATION: | Magnetic Island Cruise Corporation Pty Ltd v Reefseeker Cruises Pty Ltd & Comcove Pty Ltd & Sunny Newitt [2007] QDC 175 |
PARTIES: | Comcove Pty Ltd and Sunny Newitt (Applicants) and Magnetic Island Cruise Corporation Pty Ltd Reefseeker Cruisers Pty Ltd (Respondents) |
FILE NO/S: | D452/04 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court, Townsville |
DELIVERED ON: | 10 May 2007 |
DELIVERED AT: | Townsville |
HEARING DATES: | 30 January 2007 and 16 February 2007 |
JUDGE: | Durward SC DCJ |
ORDERS: |
|
CATCHWORDS: | Application by First and Second Third Party to strike out the defendant’s Third Party Notices; section 444E Corporations Act 2001 - “Protection of Company’s property from person bound by deed”; section 58AA Corporations Act 2001 - meaning of “court” and “Court” - Applicants not persons bound by deed of company arrangement - not a proceeding in relation to any of the Company’s “property”; Reference to “Court” does not exclude the jurisdiction of this court; Leave of the “Court” is not required. |
CASES CITED: | Daydream Island International Resort Pty Ltd v Cushway Blackford & Associates Pty Ltd (1994) QSC 298; Young v Sherman & Anor (2002) 40 QCSR 12. |
COUNSEL: | Mr A Collins for the applicant No appearance for the respondent |
SOLICITORS: | Cranston McEachern for the applicant No appearance for the respondent |
BACKGROUND
- [1]On 30 January 2007 I heard submissions in respect of two separate applications. This judgment concerns one of those, namely the application by the First and Second Third Parties ("the applicants") to strike out the defendant's ("the respondent's") Third Party Notices.
- [2]The respondent did not appear. I subsequently deferred giving judgment to give both the lawyers and the Voluntary Administrators for the respondent an opportunity to be heard on the application, beyond the content of correspondence received from each of those persons by the Registrar of this court ("the correspondence").
- [3]In that correspondence, the lawyers for the respondent, Dibbs Abbott Stillman (“the lawyers”), simply contended – without elaboration – that their client was subject to a Deed of Company Arrangement and that leave (which the applicants had not sought) was required subject to s 444E(3) of the Corporations Act 2001 (“the Act”). The Voluntary Administrators, Currie Biazos, requested that the application be adjourned so that further consideration could be given to the matter and stated that as Deed Administrators they only had minimal funds. However, they also referred to s 444E(3) of the Act.
- [4]On 16 February 2007 I formally gave directions as to further contact with the lawyers and the Voluntary Administrators. On 23 February 2007 the lawyers advised that there would be no response to the application as the respondent and, consequently the Voluntary Administrators, were without funds for the purpose of representation.
- [5]In the circumstances I am now prepared to determine the application on the basis of the submissions made on behalf of the applicants and the content of the correspondence, in so far as the jurisdictional issue that arises pursuant to section 444E and 58AA of the Act is concerned. I declined to deal with the substantive application on the first day of the hearing, until that jurisdictional issue was determined.
- [6]In the substantive proceeding the plaintiff claimed damages for breach of contract or alternatively damages pursuant to the Trade Practices Act 1975, arising out of the purchase of a motor vessel from the respondent.
- [7]The respondent defended the action and joined the applicants as First and Second Third Parties respectively.
- [8]The relevant filing dates in the substantive proceeding are as follows:
- 01.11.04 claim filed
- 18.01.05 defence filed
- 26.05.05 Third Party Notice filed
- 24.06.05 defence of Third Party Notice filed
- 14.07.05 reply to defence of Third Party Notice filed
- 19.01.07 reply filed.
THE APPLICATION
- [9]The application to strike out the Third Party Notices was brought after there had been no step taken in the proceedings for the previous 12 months or more. A number of affidavits had been filed in support of the application.
- [10]Section 444E of the Act provides as follows:
"Protection of Company's property from person bound by deed.
- (1)Until a deed of company arrangement terminates, this section applies to a person bound by the deed.
- (2)The person cannot:
- (a)make an application for an order to wind up the company; or
- (b)proceed with such an application made before the deed became binding on the person;
- (3)The person cannot:
- (a)begin or proceed with a proceeding against the company or in relation to any of its property; or
- (b)begin or proceed with an enforcement process in relation to property of the company; except:
- (c)with the leave of the Court; and
- (d)in accordance with such terms (if any) as the Court imposes.
- (4)In subsection (3);
"Property" in relation to the company includes property used or occupied by, or in the possession of the company."
- [11]Section 58AA of the Corporations Act 2001 defines the meaning of “court” and “Court”, as follows:
"(1)Subject to subsection (2) in this Act;
"court" means any court.
"Court" means any of the following courts;
- (a)The Federal Court;
- (b)The Supreme Court of a state or territory;
- (c)The Family Court of Australia;
- (d)A court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act.
- (2)Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Act may, subject of Part 9.7, be brought in any court.
Note: The matters dealt with in Part 9.7 include the applicability of limits on the jurisdictional competence of Courts."
THE QUESTIONS
- [12]Hence the questions arising for my determination are as follows:
- [13](a)Is the applicant “a person bound by the Deed" of Company Arrangement?
- (b)Is the application "a proceeding against the company or in relation to any of its property (as property is defined in s 444E(4) of the Act)"?
- (c)Does the reference to "the leave of the Court" exclude the jurisdiction of this court?
- (d)Depending on the above, do the applicants require leave to bring the application to strike out the Third Party Notices?
"A person bound”: Question 12(a)?:
- [14]The applicants were joined in the proceeding by the respondent who seeks, of course, indemnity or contribution from them in the event that the plaintiffs' action against the respondent is successful.
- [15]The applicants are not otherwise involved in the action. Neither of them has separately commenced a claim against the respondent or otherwise joined the action in an alternative capacity. They were not owed anything by, nor are they, apparently, creditors of the respondent.
- [16]The purpose of s 444E of the Act is to protect a Company's property from persons bound by the Deed. The persons primarily affected by the section are creditors.
- [17]The section is contained in Part 5.3A of the Act. That part sets out procedures which intentionally affect the rights of individual creditors. Hence, the protection afforded a company is made by means of a statutory procedure that governs the way in which individual creditors can pursue their rights.
- [18]Part 5.3A of the Act provides for the administration of the business and affairs of insolvent or near insolvent companies. Control and responsibility for the conduct of the company’s affairs, after the appointment of the Voluntary Administrator, is vested in the Administrator: section 437A.
- [19]Creditor’s claims against the company are stayed whilst the company is under administration, with some exceptions in respect of secured creditors and owners or lessors of property “utilised” (my word) by the company.
- [20]“Unauthorised” transactions or dealings with the property of a company under administration are void unless a court orders otherwise: Section 437D.
- [21]A number of things arise out of this discussion: Firstly, the applicants are not creditors; secondly the only property interest of the respondent that is potentially at risk is that which is exposed to the claim of the plaintiff; thirdly, the applicants have no claim at all against the company or its property; fourthly, the only effect of the application to strike out – if it were to proceed and be granted – would be to deny to the respondent the potential means to make good any loss – presently no more than contingent - it may suffer if the plaintiffs' claim is ultimately successful.
- [22]In my view the applicants are not "persons bound by the Deed" of Company Arrangement. To extend the natural meaning of s 444E of the Act to them would be to extend the operation of the section beyond its intended purpose.
“The Company and its Property”: Question 12(b)?:
- [23]Whilst it may be arguable that the application is "a proceeding against the company …", it is not in my view a proceeding in relation to any of its property. The latter, for the reasons referred to above, would extend the operation of the section beyond its intended purpose.
- [24]Even if the application is "a proceeding against the company" in a literal sense, it is one that involves no claim against the company. Rather, it is made to protect the property of the applicants against which the respondent has made a claim that is, and remains, a contingent claim, not yet determined or vested in any certain sum of money in favour of the respondent.
- [25]I note the views expressed in Daydream Island International Resort Pty Ltd (formerly Daydream Island Resort (Kennedy's) Pty Ltd) v Cushway Blackford & Associates Pty Ltd (formerly R Cushway & Associates (Aust) Pty Ltd) (1994) QSC 298.
- [26]In that case one of the issues was whether leave was required under s 444E for a proceeding by a First Third Party to strike out a Third Party Notice where the applicant First Third Party was subject to a Deed of Company Arrangement. The Supreme Court of Queensland (Shepherdson J) found that the first and second defendants "… are not bound by the terms of the deed of arrangement and that their claims against the first and third party for indemnity or contribution are not claims which arose on or before……. In my view s 444E does not apply in the present case and I dismiss the first third party's application to strike out the third party notice claiming indemnity or contribution and also its application that the action against it be stayed until further order."
- [27]In effect, His Honour found (at p.9) that the third party claim ".... cannot subsist as a claim until the defendants are found liable in judgment to the plaintiff for their alleged negligence or they admit liability for such….. (I interpose here that there is no liability found or admitted in the present case)…… It is only when either of those events occurs that the claim for indemnity or contribution arises for consideration". In other words, the "claim" was a contingent claim for an unknown amount of money and hence the defendants were not creditors and not bound by the terms of the Deed of Company Arrangement and s 444E did not apply.
- [28]The view expressed by His Honour is narrower than and distinguishes the decision of the Full Court of the Supreme Court of Victoria in Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd (1996) 1 VR 24, where contingent creditors were found to be bound by a Deed of Company Arragement.
- [29]However, I do not need to apply either authority in this case, which I find I can determine on the other grounds referred to in the judgment.
- [30]Further, since the respondent is subject to a statutory Deed of Company Arrangement, the action would now proceed against the administrator in his or her capacity as administrator of the respondent.
- [31]Dealings with the company’s property are under the administrator’s control with statutory rights of some parties protected: Section 437D.
- [32]In Young v Sherman & Anor (2002) 40 ACSR 12, the plaintiffs, who were creditors of the defendant company, brought a proceeding to challenge the validity of a deed of a company arrangement or to terminate it. If the deed was a valid document pursuant to the Act, then the leave of the Court was required, inter alia, under s 444E(3), for the plaintiffs to continue with the proceeding since the deed purportedly bound them as creditors. Austin J in the New South Wales Supreme Court held that the words "against the company or in relation to any of its property" in s 444E(3) should not be so widely construed so as to extend to the type of proceeding brought by the plaintiffs. He considered the proceeding was better characterised "as a proceeding in respect of the company and its affairs, to which it is proper to join the company so that it is bound by the decision". Nor, in my opinion, is such a proceeding one "in relation to any of the property of the company.” It is true that a deed of company arrangement affects the property of the company, and therefore its invalidity or termination is, in one sense, "in relation to the company's property”. However, in such a proceeding, no relief is sought with respect to particular property, and so on a natural construction of the statutory words, a proceeding to challenge the validity of a deed or to terminate it, is not a proceeding in relation to the company's property.
- [33]The application is therefore not in my view "a proceeding against the company" within the contemplation of the section.
“Leave of the Court”: Question 12(c)?:
- [34]The reference to “Court” does, upon a proper construction of s 58AA of the Act, exclude the jurisdiction of this court.
“Is “Leave” Required”: Question 12(d)?:
- [35]I find that the application is not subject to s 444E of the Act and accordingly leave of the “Court” is not required in respect of its being brought in this court.
- [36]The application can therefore proceed in this court.
THE SUBSTANTIVE APPLICATION
- [37]I note that, according to the correspondence, the only asset of the respondent is in the form of superannuation entitlements. If so, that asset is unlikely to be available to a successful plaintiff in respect of its claim or in respect of any costs order that may follow upon that event, or to the applicants in respect of any costs order it may have the benefit of if they successfully defend the Third Party claim of the respondent.
- [38]Upon an application of the principles discussed by the Court of Appeal of Queensland in Tyler v Custom Credit Corporation Ltd & Ors (2000) QCA 178, the applicants have an arguable case to strike out the Third Party Notices.
- [39]I note that the substantive application will not be defended. It would therefore fall to be determined on the basis of the applicants' submissions and upon the relevant legal principles.
- [40]I will, if requested by the applicants, proceed to determine the application on the bases that it is undefended and the respondent does not intend to appear or make further submissions, by correspondence or otherwise, in respect of it.
- [41]I give leave to the applicants to re-list the application for further hearing and determination in this court.
Orders and Directions
- Section 444E of the Corporation Act 2001 does not apply to the application.
- Leave of a Court, pursuant to s 58AA of the Corporation Act is not required for the application to be brought in this court.
- The applicants may list the application for further hearing and determination.