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King v Yurisich [2006] FCA 1369 (19 October 2006)

Last Updated: 20 October 2006

FEDERAL COURT OF AUSTRALIA

King v Yurisich [2006] FCA 1369

CORPORATIONS – application for leave to proceed against company in liquidation – whether leave required in context of an appeal – principles under which leave to be granted.

Corporations Act 2001 (Cth) ss 471B, 500
Corporations Law s 471B

BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 cited
Humber & Co v John Griffiths Cycle Company (1901) 85 LT 141 discussed
King v Yurisich [2006] FCAFC 136 cited
Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446 cited
Re Aro Co Ltd [1980] Ch 196 cited
Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 cited
Re International Pulp and Paper Co (1876) 3 Ch D 594 referred to
Skinner v Jeogla Pty Ltd (2001) 37 ACSR 106 discussed

McPherson’s Law of Company Liquidation (2006, 5^th ed)

JOHN MILLER CAMPBELL KING & OTHERS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND v WAYNE JAMES YURISICH, CHERYL ANNE YURISICH, LANE MOLLER PARTNERS PTY LTD T/AS LANE MOLLER PARTNERS (IN LIQUIDATION) AND ROBERT YOUNG
1206 OF 2005

WEINBERG J
19 OCTOBER 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1206 OF 2005

BETWEEN:	JOHN MILLER CAMPBELL KING & OTHERS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND Appellants
AND:	WAYNE JAMES YURISICH First Respondent CHERYL ANNE YURISICH Second Respondent LANE MOLLER PARTNERS PTY LTD T/AS LANE MOLLER PARTNERS (in liquidation) Third Respondent ROBERT YOUNG Fourth Respondent

JUDGE:	WEINBERG J
DATE OF ORDER:	19 OCTOBER 2006
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appellants be given leave to proceed against Lane Moller Partners Pty Limited trading as Lane Moller Partners (ACN 063 008 908) (in liquidation), pursuant to s 500(2) of the Corporations Act 2001 (Cth).
2. Costs of the Notice of Motion dated 13 October 2006 be costs in the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1206 OF 2005

BETWEEN:	JOHN MILLER CAMPBELL KING & OTHERS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND Appellants
AND:	WAYNE JAMES YURISICH First Respondent CHERYL ANNE YURISICH Second Respondent LANE MOLLER PARTNERS PTY LTD T/AS LANE MOLLER PARTNERS (in liquidation) Third Respondent ROBERT YOUNG Fourth Respondent

JUDGE:	WEINBERG J
DATE:	19 OCTOBER 2006
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 On 4 September 2006 the Full Court delivered judgment in this matter: King v Yurisich [2006] FCAFC 136. The appeal succeeded, and it was ordered that the appellants bring in short minutes of order reflecting the Full Court’s reasons for judgment. On 20 September 2006 the Full Court ordered that the appeal be allowed and that there be judgment in favour of the appellants against Lane Moller Partners Pty Limited trading as Lane Moller Partners and against Robert Young, the third and fourth respondents to the appeal respectively, in the sum of $200,135, together with interest in the sum of $121,876.31. The parties were given further time to file submissions relating to costs.
2 On 5 October 2006 liquidators were appointed to Lane Moller Partners Pty Limited on a creditors’ voluntary winding up.
3 The appellants, by notice of motion, seek leave to proceed against the third respondent, now described as Lane Moller Partners Pty Limited, trading as Lane Moller Partners (in liquidation), pursuant to s 500(2) of the Corporations Act 2001 (Cth).
4 Section 500 provides:

"(1) Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void.
(2) 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.
(3) The Court may require any contributory, trustee, receiver, banker, agent, officer or employee of the company to pay, deliver, convey, surrender or transfer forthwith or within such time as the Court directs to the liquidator any money, property or books in his, her or its hands to which the company is prima facie entitled."

5 The appellants are concerned that they may need the leave of the Court to proceed against Lane Moller Partners, given that the issue of costs in relation to the appeal has not been determined. The liquidators, though on notice, neither appeared, nor opposed the grant of leave.
6 It is a vexed question whether leave is required to proceed against a company in liquidation in the context of an appeal. In Humber & Co v John Griffiths Cycle Company (1901) 85 LT 141, Lord Davey, the only member of the House of Lords to address the point, held that where a company was being wound up under the direction of the court, an appeal in which the company was a respondent, brought in an action in which the company was originally the plaintiff, was not a "proceeding against the company" within s 87 of the Companies Act 1862 (UK). Accordingly, leave to proceed was not required.
7 However, in Skinner v Jeogla Pty Ltd (2001) 37 ACSR 106, which arose out of an application to the court for leave to proceed against a company in liquidation brought under s 471B of the Corporations Law, the New South Wales Court of Appeal doubted the correctness of Humber. It noted that the language of s 471B differed significantly from that of the provision under consideration in Humber. Spigelman CJ observed (at [16]) that Lord Davey’s reasoning was "redolent of the language of waiver". He concluded that there were two points of distinction between Humber and the case before the Court of Appeal. The more important of these was that in 1901, when Humber was decided, the position was that leave to proceed against a company in liquidation had to be obtained from the court that had made the winding up order, and not the appellate court. The practice under the 1862 Act was said to have been set out by Jessell MR in Re International Pulp and Paper Co (1876) 3 Ch D 594. Given the jurisdictional limits upon the statutory power that then existed, Spigelman CJ considered it hardly surprising that the word "proceedings" would be read down so as not to encompass an appeal.
8 Spigelman CJ noted that there is authority for the proposition that an application for security for costs against a company in liquidation is not a "proceeding" for which leave of the court is required: Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446; and BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339. However, his Honour observed that an application for security for costs can readily be distinguished from the continuation of a proceeding within the meaning of s 471B and therefore, I interpolate, s 500(2) as well.
9 Ipp AJA agreed with Spigelman CJ that BPM was readily distinguishable. In his Honour’s view an appeal was a "proceeding" within s 471B whereas an application for security for costs was not. In addition, the application for security for costs in BPM was regarded as a "defensive proceeding" and it was "open to argument" that the appeal in Skinner could not be so categorised.
10 Powell JA, the third member of the Court of Appeal, though he did not express a concluded view upon the matter, was inclined to think leave to proceed was not required in the context of an appeal. He added that unless convinced that BPM was plainly wrong, which he was not, the object of uniformity in interpreting national legislation would suggest that the Court of Appeal should follow the interpretation of s 471B by the Full Court of the Supreme Court of Western Australia in BPM. By implication, he regarded BPM as supporting the conclusion that, in the case of an appeal, leave to proceed was not required.
11 Ultimately, in Skinner, the Court of Appeal did not find it necessary to determine whether, in the context of an appeal, leave to proceed was required. That was because the appellant in that case was prepared to proceed upon the assumption that such leave was necessary. In the event, leave was refused.
12 In the present case, Mr Cawthorn, who appeared on behalf of the appellants, submitted that if leave to proceed were required, it should be granted.
13 Sections 471B and 500 are silent as to the principles under which leave to proceed will be granted. In McPherson’s Law of Company Liquidation (2006, 5^th ed), it is said (at [7.970]) that the courts have an absolute discretion in deciding whether or not they will grant leave to proceed: Re Aro Co Ltd [1980] Ch 196. It is also said that there is a presumption in favour of leaving those with claims against companies in liquidation to the ordinary proof of debt procedure which is, generally speaking, a cheaper and more efficient way of resolving their claims: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314. The reason given is that the liquidator’s attention and resources should not be diverted into expending substantial funds on defending proceedings by those with claims against the company when there is a simpler procedure available, namely calling for and adjudicating upon creditors’ proofs of debt, with a right of appeal under s 1321: Re Gordon Grant and Grant.
14 Other factors said to be important in determining whether leave to proceed should be granted are the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed: Re Gordon Grant and Grant Pty Ltd at 317 (per McPherson J, with whom WB Campbell CJ and Sheahan J agreed).
15 Plainly, this proceeding has now progressed to a very advanced stage. It is all but complete. I accept Mr Cawthorn’s submission that it would now be inappropriate to require the proceeding to be the subject of a proof of debt in the winding up. Although there is a judgment debt in favour of the appellants, there remains outstanding an issue as to costs which the liquidators cannot resolve. In addition, it is unlikely that the liquidators will be distracted or diverted from their task by allowing this matter to proceed to finality before the Full Court, rather than having it stayed because the company is now in liquidation.
16 It follows that, if leave to proceed against Lane Moller Partners is in fact required (a matter upon which I express no concluded view), such leave is granted.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.

Associate:

Dated: 19 October 2006

Counsel for the Appellants:	Mr P Cawthorn

Solicitor for the Appellants:	McCabe Terrill

No appearance for the Respondents.

Date of Hearing:	19 October 2006

Date of Judgment:	19 October 2006

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1	On 4 September 2006 the Full Court delivered judgment in this matter: King v Yurisich [2006] FCAFC 136. The appeal succeeded, and it was ordered that the appellants bring in short minutes of order reflecting the Full Court’s reasons for judgment. On 20 September 2006 the Full Court ordered that the appeal be allowed and that there be judgment in favour of the appellants against Lane Moller Partners Pty Limited trading as Lane Moller Partners and against Robert Young, the third and fourth respondents to the appeal respectively, in the sum of $200,135, together with interest in the sum of $121,876.31. The parties were given further time to file submissions relating to costs.
2	On 5 October 2006 liquidators were appointed to Lane Moller Partners Pty Limited on a creditors’ voluntary winding up.
3	The appellants, by notice of motion, seek leave to proceed against the third respondent, now described as Lane Moller Partners Pty Limited, trading as Lane Moller Partners (in liquidation), pursuant to s 500(2) of the Corporations Act 2001 (Cth).
4	Section 500 provides:

5	The appellants are concerned that they may need the leave of the Court to proceed against Lane Moller Partners, given that the issue of costs in relation to the appeal has not been determined. The liquidators, though on notice, neither appeared, nor opposed the grant of leave.
6	It is a vexed question whether leave is required to proceed against a company in liquidation in the context of an appeal. In Humber & Co v John Griffiths Cycle Company (1901) 85 LT 141, Lord Davey, the only member of the House of Lords to address the point, held that where a company was being wound up under the direction of the court, an appeal in which the company was a respondent, brought in an action in which the company was originally the plaintiff, was not a "proceeding against the company" within s 87 of the Companies Act 1862 (UK). Accordingly, leave to proceed was not required.
7	However, in Skinner v Jeogla Pty Ltd (2001) 37 ACSR 106, which arose out of an application to the court for leave to proceed against a company in liquidation brought under s 471B of the Corporations Law, the New South Wales Court of Appeal doubted the correctness of Humber. It noted that the language of s 471B differed significantly from that of the provision under consideration in Humber. Spigelman CJ observed (at [16]) that Lord Davey’s reasoning was "redolent of the language of waiver". He concluded that there were two points of distinction between Humber and the case before the Court of Appeal. The more important of these was that in 1901, when Humber was decided, the position was that leave to proceed against a company in liquidation had to be obtained from the court that had made the winding up order, and not the appellate court. The practice under the 1862 Act was said to have been set out by Jessell MR in Re International Pulp and Paper Co (1876) 3 Ch D 594. Given the jurisdictional limits upon the statutory power that then existed, Spigelman CJ considered it hardly surprising that the word "proceedings" would be read down so as not to encompass an appeal.
8	Spigelman CJ noted that there is authority for the proposition that an application for security for costs against a company in liquidation is not a "proceeding" for which leave of the court is required: Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446; and BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339. However, his Honour observed that an application for security for costs can readily be distinguished from the continuation of a proceeding within the meaning of s 471B and therefore, I interpolate, s 500(2) as well.
9	Ipp AJA agreed with Spigelman CJ that BPM was readily distinguishable. In his Honour’s view an appeal was a "proceeding" within s 471B whereas an application for security for costs was not. In addition, the application for security for costs in BPM was regarded as a "defensive proceeding" and it was "open to argument" that the appeal in Skinner could not be so categorised.
10	Powell JA, the third member of the Court of Appeal, though he did not express a concluded view upon the matter, was inclined to think leave to proceed was not required in the context of an appeal. He added that unless convinced that BPM was plainly wrong, which he was not, the object of uniformity in interpreting national legislation would suggest that the Court of Appeal should follow the interpretation of s 471B by the Full Court of the Supreme Court of Western Australia in BPM. By implication, he regarded BPM as supporting the conclusion that, in the case of an appeal, leave to proceed was not required.
11	Ultimately, in Skinner, the Court of Appeal did not find it necessary to determine whether, in the context of an appeal, leave to proceed was required. That was because the appellant in that case was prepared to proceed upon the assumption that such leave was necessary. In the event, leave was refused.
12	In the present case, Mr Cawthorn, who appeared on behalf of the appellants, submitted that if leave to proceed were required, it should be granted.
13	Sections 471B and 500 are silent as to the principles under which leave to proceed will be granted. In McPherson’s Law of Company Liquidation (2006, 5^th ed), it is said (at [7.970]) that the courts have an absolute discretion in deciding whether or not they will grant leave to proceed: Re Aro Co Ltd [1980] Ch 196. It is also said that there is a presumption in favour of leaving those with claims against companies in liquidation to the ordinary proof of debt procedure which is, generally speaking, a cheaper and more efficient way of resolving their claims: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314. The reason given is that the liquidator’s attention and resources should not be diverted into expending substantial funds on defending proceedings by those with claims against the company when there is a simpler procedure available, namely calling for and adjudicating upon creditors’ proofs of debt, with a right of appeal under s 1321: Re Gordon Grant and Grant.
14	Other factors said to be important in determining whether leave to proceed should be granted are the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed: Re Gordon Grant and Grant Pty Ltd at 317 (per McPherson J, with whom WB Campbell CJ and Sheahan J agreed).
15	Plainly, this proceeding has now progressed to a very advanced stage. It is all but complete. I accept Mr Cawthorn’s submission that it would now be inappropriate to require the proceeding to be the subject of a proof of debt in the winding up. Although there is a judgment debt in favour of the appellants, there remains outstanding an issue as to costs which the liquidators cannot resolve. In addition, it is unlikely that the liquidators will be distracted or diverted from their task by allowing this matter to proceed to finality before the Full Court, rather than having it stayed because the company is now in liquidation.
16	It follows that, if leave to proceed against Lane Moller Partners is in fact required (a matter upon which I express no concluded view), such leave is granted.