Smart Company Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd [2011] FCA 35 (2 February 2011)

Last Updated: 4 February 2011

FEDERAL COURT OF AUSTRALIA

Smart Company Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd

[2011] FCA 35

Citation:		Smart Company Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd [2011] FCA 35
Parties:		THE SMART COMPANY PTY LTD ACN 061 975 344 (IN LIQUIDATION) v CLIPSAL AUSTRALIA PTY LTD ACN 007 873 529, CLIPSAL INTEGRATED SYSTEMS PTY LTD ACN 089 444 931 and CLIPSAL TECHNOLOGIES AUSTRALIA PTY LTD ACN 089 444 931
File number:		WAD 132 of 2004
Judge:		LANDER J
Date of judgment:		2 February 2011
Catchwords:		PRACTICE AND PROCEDURE – joinder of third party – company in liquidation – application by third party to be joined to the proceeding on the basis of a purported assignment of certain choses in action – application by contributory for Court to give leave under its implied power to permit proceeding to be brought on behalf of company in liquidation – exercise of implied power – relevant factors CORPORATIONS – liquidation – application of ss 236 and 237 when company in liquidation – application by a contributory for leave to continue proceeding in the name of the company – implied power of Court to grant leave Held: Application dismissed – assignment not valid basis for joinder – exercise of implied power not appropriate – ss 236 and 237 not operable where company in liquidation.
Legislation:		Corporations Act 2001 (Cth) ss 236, 237
Cases cited:		Aliprandi v Griffith Vintners Pty Ltd (In Liq) (1991) 6 ACSR 250 followed Cadina Express Pty Ltd (In Liq) v Deputy Commissioner of Taxation [1999] NSWSC 1143; (1999) 157 FLR 424 applied Cape Breton v Fenn (1881) 17 Ch D 198 applied Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577 applied Pearl Coast Divers Pty Ltd (in liq) v Cossack Pearls Pty Ltd (2008) 249 ALR 591 followed Russell v Westpac Banking Corporation [1994] SASC 4479; (1994) 61 SASR 583 applied
Date of hearing:	6 July 2010
Date of last submissions:	6 July 2010
Place:	Adelaide
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	51
Counsel for the Applicant:	Mr W J N Wells QC
Solicitor for the Applicant:	Lynch Meyer Lawyers
Counsel for the Respondents:	Mr S Doyle with Mr B Doyle
Solicitor for the Respondents:	Kelly & Co Lawyers
Counsel for the Intervenor:	Mr M Hoile
Solicitor for the Intervenor:	Hynes & Co Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 132 of 2004

BETWEEN:	THE SMART COMPANY PTY LTD ACN 061 975 344 (IN LIQUIDATION) Applicant
AND:	CLIPSAL AUSTRALIA PTY LTD ACN 007 873 529 First Respondent CLIPSAL INTEGRATED SYSTEMS PTY LTD ACN 089 444 931 Second Respondent CLIPSAL TECHNOLOGIES AUSTRALIA PTY LTD ACN 089 444 931 Third Respondent

JUDGE:	LANDER J
DATE OF ORDER:	2 FEBRUARY 2011
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1. Enterprise Global Resources Pty Ltd’s amended notice of motion be dismissed.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 132 of 2004

BETWEEN:	THE SMART COMPANY PTY LTD ACN 061 975 344 (IN LIQUIDATION) Applicant
AND:	CLIPSAL AUSTRALIA PTY LTD ACN 007 873 529 First Respondent CLIPSAL INTEGRATED SYSTEMS PTY LTD ACN 089 444 931 Second Respondent CLIPSAL TECHNOLOGIES AUSTRALIA PTY LTD ACN 089 444 931 Third Respondent

JUDGE:	LANDER J
DATE:	2 FEBRUARY 2011
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1. On 21 June 2010 Enterprise Global Resources Pty Ltd (EGR) made an oral application to intervene in these proceedings pursuant to ss 236 and 237 of the Corporations Act 2001 (Cth) as a member of the applicant. The applicant is in liquidation.
2. On 28 May 2010 Judge Withers, a Master of the Supreme Court of South Australia, made an order in the Supreme Court for the winding up of the applicant in insolvency. Messrs Andre Strazdins and Nicholas Cooper were appointed as liquidators.
3. Mr Hoile, who appeared for EGR, said that his client sought leave to intervene to put submissions first, in respect to an application made by the respondent to strike out the applicant’s claim; secondly, in respect to an application made by the respondent for security for costs; and thirdly, on the applicant’s application for further and better discovery.
4. I was informed by Mr Hoile that EGR is the sole shareholder of the applicant and its sole director is Ms Dorothea Tomazos. Ms Tomazos is sometimes referred to in the documents as Ms Dorothea Tomazou.
5. I made an order that if EGR paid into Court as security for costs the amount of $15,000 within seven days of 21 June 2010 I would hear the oral application. EGR paid into Court that amount and on 28 June 2010 filed a notice of motion seeking the following orders:
   1. that leave be granted for EGR to be joined as a Co-Applicant as assignee of the chose-in-action, which is the claim in this Honourable Court by The Smart Company Pty Ltd (Smart) against the Respondents;
      
   2. alternatively that leave be granted for EGR to be joined as a Co-Applicant pursuant to section 236 of the Corporations Act 2001;
      
   3. that an Affidavit of Stephen Patrick McNamara to be sworn on 28 June 2010 be admitted as evidence in and in response to the Respondents’ Notice of Motion dated 17 June 2010 to reopen argument with respect to the dismissal of the whole of the proceedings or the strike out of those sections of Smart’s statement of claim as they relate to Unilateral Products;
      
   4. that Smart’s Notice of Motion dated 27 April 2010 be fully heard and that leave be given to amend paragraph 7 of the Notice of Motion to include the documents referred to in the Affidavit of Stephen Patrick McNamara to be sworn on 28 June 2010;
      
   5. that a new timetable be set in relation to the preparation of this matter for trial; and
      
   6. such other orders as this Honourable Court deems just or appropriate.
      
6. The notice of motion was accompanied by an affidavit sworn by EGR’s solicitor, Cynthia Hynes on 28 June 2010. I will return to that affidavit.
7. When the matter came on for hearing EGR sought to amend the notice of motion and sought the substitution of paragraphs 1 and 2 of the orders in the original notice of motion with the following:
   1. that leave be granted to permit EGR to continue the proceedings with respect to the causes of action that are pleaded in relation to the Trade Practices Act, Fair Trading Act and breaches of fiduciary duty in the name of The Smart Company Pty Ltd (Smart) against the Respondents;
      
   2. that leave be granted for EGR to be joined as a Co-Applicant with respect to the remaining causes of action as pleaded by Smart.
      
8. There was no objection by the respondents or the applicant or counsel for the liquidators. When Mr Hoile sought to amend the notice of motion he announced that his client no longer relied upon s 236 to intervene in the proceedings, accepting that a decision of the New South Wales Court of Appeal in Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780 stood for the proposition that s 236 had no operation where the company for which the member seeks to intervene is in liquidation: see also Pearl Coast Divers Pty Ltd (in liq) v Cossack Pearls Pty Ltd (2008) 249 ALR 591. Having regard to the decision in Chahwan [2008] NSWCA 52; 245 ALR 780, Mr Hoile was right to abandon any reliance upon s 236. I would have been bound to follow the decision of the Court of Appeal unless I was of the opinion that it was plainly wrong: Australian Securities Commisssion v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485. Although the point now does not arise for decision, I would have followed the decision in any event because, in my opinion, the decision is right.
9. Having abandoned reliance upon s 236, EGR needed some other right to intervene absent that statutory authority.
10. Mr Hoile relied upon the Court’s inherent jurisdiction to make an order allowing a contributory to prosecute a proceeding on behalf of the company of which it is a member when that company will not itself prosecute the proceeding.
11. He relied on an affidavit of Ms Hynes, EGR’s solicitor. Ms Hynes’ affidavit establishes that Dorothea Tomazos is a director and the secretary of the applicant. The applicant’s other director is Mr Dean Clift. Its sole shareholder is EGR which is the trustee of the Smartcard Trust and EGR holds its shares in the applicant as trustee for that trust.
12. Exhibited to Ms Hynes’ affidavit is a Deed of Assignment dated 6 April 2010 by which the applicant purports to assign to Ms Tomazos the applicant’s chose in action in these proceedings. The Deed is executed by Ms Tomazos as both director and secretary. The Deed does not claim that it is being executed in accordance with any resolution of the board of the applicant. Mr Clift is not a signatory to the Deed. The Deed is also executed by Ms Tomazos as the assignee of the chose in action and her signature is witnessed by Matthew Deller, a solicitor who, it appears, unknown to others, was the solicitor for the applicant at the time when the Deed was purportedly executed. Mr Deller was not the applicant’s solicitor in these proceedings. The applicant has been represented by Commercial & General Law since 10 November 2009. Mr S McNamara, the proprietor of that firm, has had the conduct of these proceedings on behalf of the applicant up to 28 May 2010 when liquidators were appointed by the Supreme Court.
13. The Deed provides that the applicant has agreed to assign the chose in action which is defined as being “all of Smart’s rights and entitlements arising from or in connection with its right to claim monetary relief and/or other relief against the respondents which is the subject of the Federal Court action and any other rights it may have against the respondents, the directors or related entities arising out of the conduct of the respondents, the directors or related entities” to Ms Tomazos absolutely for a consideration of $1. The Deed provides that the applicant has agreed that Ms Tomazos may without any restriction whatsoever use its name in the Federal Court action and any other action associated with the chose in action.
14. It is warranted in paragraph 6 of the Deed:

Smart hereby warrants that:

6.1 Smart has been properly authorised to execute this Deed;

6.2 Smart has full corporate power and lawful authority to assign the Chose-in-Action to Tomazou on the terms set out herein and to otherwise perform its obligations under this Deed; and

6.3 the assignment of the Chose-in-Action is taken by Tomazou free of any encumbrances or claims or interests of any other person.

15. Ms Tomazos has warranted in accordance with clause 7.4 to pay to the applicant “the Further Consideration”. The “Further Consideration” is defined to mean ten (10) per centum (10%) of any monies received in respect of the Federal Court action. Clause 7.4 is a rather odd clause because Ms Tomazos has thereby warranted that she will pay to the applicant 10% of any monies received in respect of the Federal Court action if 10% of any monies received in respect of the Federal Court action shall have been received. Clause 7.4 contains an error.
16. That Deed was purportedly exercised prior to the Supreme Court order made by Judge Withers winding up the applicant. The existence of that Deed was unknown to this Court prior to 28 May 2010. Neither the applicant, nor its directors or its legal representatives in these proceedings, advised me of the Deed. The applicant’s legal representatives in these proceedings advised me that they were unaware of the existence of this Deed prior to 28 May 2010. Of course, I accept that statement.
17. From a reading of Judge Withers’ reasons in the Supreme Court of South Australia, it was apparently unknown to him notwithstanding that Mr Deller, who witnessed Ms Tomazos’ signature, appeared for the applicant before him on the application for winding up at the time that he made the winding up order on 28 May 2010.
18. The Deed of Assignment was first disclosed to this Court when Ms Tomazos sent to my Associate a copy of the chose in action at 11.33am on 28 May 2010. It would appear from information supplied to the Court that a little more than an hour earlier that morning she sent an email to the solicitor, who was then the solicitor on record in this Court acting for the applicant, advising, “Steve, please proceed with the chose in action.” The Deed of Assignment was apparently executed on 6 April 2010 and it is likely that was the date of its execution because it was stamped on 7 April 2010.
19. When EGR made its oral application to me on 21 June 2010 I asked Mr Hoile to indicate whether EGR claimed that there had been a valid assignment by the applicant to Ms Tomazos because, as I said to him at the time, that would be important because if the applicant no longer had any interest in the proceedings that would be a reason to refuse EGR’s application to intervene. He said he did not have instructions as to that matter.
20. It seemed to be fundamental to his application to know what his client’s attitude was, having regard to the fact that Ms Tomazos was a director of both the applicant and EGR, and also purportedly the assignee of the chose in action. One would have thought that if as sole director of EGR she had instructed her solicitors and Mr Hoile to make an application to intervene in the proceedings as the shareholder of the applicant, EGR was maintaining that the applicant still retained an interest in the proceedings. That, of course, would be inconsistent with her claiming in her own right that she had received the benefit of the assignment from the applicant.
21. I put to Mr Hoile at the hearing of 21 June 2010 that there seemed to be a tension between Ms Tomazos’ role as the director of the applicant, her role as a director of EGR, the shareholder in the applicant, and her receiving the benefit of the assignment. Exhibited to Ms Hynes’ affidavit was a Deed of Appointment dated 9 June 2010 which recited:
    100. Pursuant to a certain Deed of Assignment of Chose-in-Action between The Smart Company Pty Ltd (ACN 061 975 344) (“the Smart Company”) (now “The Smart Company Pty Ltd (ACN 061 975 344) (In Liquidation”) and Tomazou dated the 6th April 2010 (“the Deed of Assignment of Chose-in-Action”), the Smart Company assigned absolutely all of its rights, title and interest in a certain Chose-in-Action against Clipsal Australia and other parties which is presently the subject of Federal Court of Australia South Australia District Registry Action No. WAD132/2004.
         
22. Clause 3 of the Deed provides:
    3. JOINT DECLARATION OF TOMAZOU AND EGR AS TO DEED OF ASSIGNMENT OF CHOSE-IN-ACTION
       

The parties hereto declare that Tomazou, in entering into the Deed of Assignment of Chose-in-Action on 6th April 2010 with the Smart Company, did so exclusively pursuant to an appointment by EGR of Tomazou on that date as an additional trustee for and on behalf of the Trust as a separate trustee of the Trust for that part of the property of the Trust which was then proposed to be constituted by the Chose-in-Action.

23. Clause 4 of the Deed effectuates clause 3.
24. Apparently, pursuant to the second Deed, Ms Tomazos was appointed a trustee of the trust of which EGR is also a trustee of as and from 6 April 2010 and entered into the Deed of Assignment and took the assignment of the chose in action as trustee on behalf of the Smart Smartcard Trust.
25. That Deed is also executed on behalf of EGR by Ms Tomazos as director and secretary, and insofar as it binds her in her own right. Again Mr Deller witnessed her signature.
26. That Deed had not been brought to this Court’s attention prior to the tender of Ms Hynes’ affidavit on 6 July 2010.
27. However, that does not complete the dealing with the chose in action. On 26 June 2010 Ms Tomazos entered into another Deed with EGR, the recitals to which are:
    1. Pursuant to a certain Deed of Assignment of Chose-in-Action between The Smart Company Pty Ltd (ACN 061 975 344) (“the Smart Company”) (now “The Smart Company Pty Ltd (ACN 061 975 344) (In Liqudiation”) and Tomazou dated the 6th April 2010 (“the Deed of Assignment of Chose-in-Action”), the Smart Company assigned absolutely all of its rights, title and interest in a certain Chose-in-Action against Clipsal Australia and other parties which is presently the subject of Federal Court of Australia South Australia District Registry Action No. WAD132/2004.
       
    2. Pursuant to a Deed of Appointmnet dated 9 June 2010 EGR and Tomazou jointly declared that Tomazou, in entering into a certain Deed of Assignment of Chose-in-Action on 6 April 2010 with the Smart Company did so exclusively pursuant to an appointment by EGR of Tomazou on that dated as an additional trustee for and on behalf of the Trust as a separate trustee of the Trust for that part of the property which was then proposed to be constituted by the Chose in Action, and to the extent necessary ratified the said appointment of Tomazou as a new additional trustee of the Trust aforesaid with such appointment taking effect as from 6 April 2010.
       
    100. EGR is a trustee and Tomazou is an additional trustee of a certain Deed of Settlement made the 8th April 2002 whereby Stephen John Smith of c/-Thomson Playford 101 Pirie Street Adelaide in the State of South Australia (“the Settlor”) settled the sum of ten dollars ($10.00) pursuant to the terms of the said Deed of Settlement (“the Deed of Settlement”) creating the trust known as the Smartcard Trust (“the Trust”).
         
    4. Clause 26 of the Trust Deed provides:
       

“26 Resignation of Trustee

Any Trustee and any person who may by succession become a Trustee may resign or renounce such position by notice in writing to the Trustee and forthwith upon the giving of such notice the person giving the same shall for all purposes hereunder cease to be a Trustee or to be a person who may by succession become a Trustee (as the case may be) but any such person shall remain eligible to be appointed a Trustee pursuant to the powers of appointment contained herein provided that a sole surviving Trustee shall not resign except upon appointing a new Trustee or new Trustees in his or its place.”

5. Tomazou as an additional trustee of the Trust and to the extent necessary if an assignment has not already been completed, wishes to assign to EGR as trustee of the Trust all rights title and interest in the Chose-in-Action absolutely.
   
6. Following the completion of the assignment referred to in Recital E above Tomazou desires to retire as an additional trustee of the Trust.
   

28. Clause 3 of the Deed provides:

3. ASSIGNMENT OF CHOSE-IN-ACTION

Tomazou as an additional trustee of the Trust for that part of the property of the Trust which is constituted by the Chose-in-Action (and to the extent necessary if such assignment has not already been completed), hereby assigns and transfers to EGR as trustee of the Trust all rights title and interest in the Chose-in-Action absolutely.

29. Clause 4 provides:

4. PERMISSION TO USE NAME IN FEDERAL COURT ACTION

Tomazou as an additional trustee of the Trust for that part of the property of the Trust which is constituted by the Chose-in-Action (and to the extent necessary if permission has not already been granted), hereby authorises EGR without restriction whatsoever to use the name of the Smart Company in the Federal Court Action and any other action associated with the Chose-in-Action.

30. Again the Deed is executed by Ms Tomazos in her own right and as director and secretary on behalf of EGR. That Deed was entered into after the first hearing and after I had raised the problems which might need to be addressed by Ms Tomazos including her apparent conflict.
31. It is upon those facts that EGR sought to be given leave in accordance with the amended notice of motion.
32. The circumstances giving rise to the purported assignment of the chose in action on 6 April 2010 to Ms Tomazos and the further Deeds which purport to have the effect of her receiving the chose in action as trustee for the Smartcard Trust, her appointment as a trustee of that trust, her further assignment of that chose in action and her resignation as trustee, raises serious doubts about the validity of the transactions.
33. If the transactions were valid, it would mean that the applicant’s sole asset, which is said to be the chose in action worth $4 billion, has been assigned to its shareholder on behalf of the Smartcard Trust as beneficiary. That would have the effect of defeating the claims of any unsecured creditors of the applicant.
34. On this application Mr Hoile also sought to rely upon the affidavit of Stephen McNamara sworn on 28 June 2010. Mr McNamara was still the solicitor of record for the applicant at the date of this application. Apparently Mr McNamara thought it within his retainer as the applicant’s solicitor to swear an affidavit in support of EGR’s application to intervene based upon an assignment by the applicant of the chose in action to Ms Tomazos as I have identified above.
35. As I have said, the company is in liquidation and the persons charged with the responsibility of the company’s affairs are the liquidators. Whether they consented to Mr McNamara swearing this affidavit on behalf of the applicant’s shareholders, which claims now to be the trustee of the chose in action on behalf of the Smartcard Trust, is not known to me. Moreover, in that affidavit Mr McNamara exhibits a number of documents which have been discovered in the principal proceedings for the purpose of assisting EGR to make this application to be joined as a party to the proceedings. In due course, it may be necessary to consider whether the use of those documents on this application amounts to a breach of the implied undertaking, in that the documents were not used as the implied undertaking requires other than for the conduct of the action on behalf of the applicant: Harman v Secretary of State for the Home Department [1983] AC 280. In any event, I refused to admit the tender of Mr McNamara’s affidavit which was in many respects inadmissible. It contains conclusions, arguments, submissions and inappropriate assertions.
36. The causes of action relied upon by the applicant in this case include contraventions of the Trade Practices Act, breaches of fiduciary duty and breaches of contract. EGR accepted on this application that the causes of action arising out of s 82 of the Trade Practices Act are personal and cannot be assigned: Salfinger v Niugini Mining (Australia) Pty Ltd (No 3) [2007] FCA 1532; Pearl Coast Divers Pty Ltd (in liq) v Cossack Pearls Pty Ltd [2008] FCA 927; 249 ALR 591. During argument, counsel accepted as the amended notice of motion is framed that the assignment could, if valid, only be effective in assigning any cause of action or chose in action in contract. It follows therefore that if the assignment were valid EGR could only prosecute that part of the proceedings relating to a claim of breach of contract and leave to the applicant to prosecute the cause of action under the Trade Practices Act and in equity.
37. Mr Hoile accepted that on this application I was not in a position to determine whether or not the assignment of the chose in action was valid. He accepted that that matter was an issue before the Supreme Court and it was for the Supreme Court to decide that matter.
38. On 27 August 2010 Judge Withers, on the application of the liquidators of the applicant, declared the Deeds of Assignment of 6 April 2010 and 26 June 2010 void. He made a declaration that the applicant remains the owner of the chose in action in these proceedings. On 17 September 2010 EGR and Ms Tomazos filed a notice of appeal in the Supreme Court against the declarations and orders made by Judge Withers. The appeal has not yet been set down for hearing.
39. It follows that EGR cannot rely upon either of the assignments for the application now made. They have been held to be void.
40. I cannot allow EGR’s application to continue the proceedings first started by the applicant or to be joined as a co-applicant in respect to any of the causes of action mentioned in paragraph 1 of the amended notice of motion on the basis that it is entitled by virtue of the assignments in circumstances where the Supreme Court has declared them to be void.
41. Even if the assignments were not void, they would not have the effect of assigning any of the statutory causes of action to EGR. That would be another reason to refuse the application made on the basis of the assignments. It would lead to the unsatisfactory result that the different causes of action which are said to arise out of the same facts and circumstances would be separately prosecuted by the applicant and its shareholders.
42. Mr Hoile argued that the orders sought should be made even if the assignments were not valid or ineffective. EGR contended that this Court retained an inherent power to permit proceedings to be taken in the name of a company by its contributories and creditors and relied upon a decision of Gilmour J in Pearl Coast Divers Pty Ltd (in liq) v Cossack Pearls Pty Ltd [2008] FCA 927; 249 ALR 591.
43. The Court does have power in the course of a winding up of a company to permit proceedings to be brought on behalf of that company by a creditor or a member. Although it has been described as a power in the Court’s inherent jurisdiction, in this Court it would be an implied power rather than an inherent power: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 630. Although in the ordinary case it is the liquidator who has the authority to prosecute a proceeding in a Court, the Courts have held that there is a residual power in the Court to authorise members or creditors to conduct litigation in the name of the company: Cape Breton v Fenn (1881) 17 Ch D 198; Aliprandi v Griffith Vintners Pty Ltd (In Liq) (1991) 6 ACSR 250; Russell v Westpac Banking Corporation [1994] SASC 4479; (1994) 61 SASR 583; Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577; Pearl Coast Divers Pty Ltd v Cossack Pearls Pty Ltd [2008] FCA 927; 249 ALR 591. In Cape Breton v Fenn 17 Ch D 198, it was said that the principle is akin to the right of a beneficiary under a trust to bring a suit to recover trust property where the trustee neglects or refuses to do so.
44. Authority suggests that the Court will not exercise the power unless the Court is satisfied that the proceeding to be taken in the company’s name is not vexatious or oppressive: Lloyd-Owen v Bull [1936] 4 DLR 273; Russell v Westpac Banking Corporation [1994] SASC 4479; 61 SASR 583. That requires the Court to have regard to the merits of the proceeding. In this case the proceeding has been extant for a very long time. Although the respondents have made very many complaints about the way in which this proceeding has been prosecuted and the costs to which the respondents have been put, it has not been suggested that the subject matter of the proceedings is vexatious or oppressive. It follows that this application would not be refused on that ground.
45. The liquidator’s attitude to the application is most important: Cadina Express Pty Ltd (In Liq) v Deputy Commissioner of Taxation [1999] NSWSC 1143; (1999) 157 FLR 424. That follows because the liquidator is charged with getting in the company’s assets and has the responsibility for protecting those assets for the benefit of the company’s creditors. The liquidators oppose the application to allow EGR to prosecute the proceeding and one can understand why. The applicant and Ms Tomazos and EGR all have different positions which conflict. The applicant is under the control of the liquidators pursuant to the winding up order made in the Supreme Court. The party who is seeking to prosecute the proceeding is a shareholder of the applicant which at the same time claims to be entitled to the benefit of an assignment of the chose in action to it as trustee for a trust for undisclosed beneficiaries.
46. Because the applicant has refused during the course of the proceedings to identify the beneficiaries of the Smartcard Trust and on this application so also did EGR, I enquired of Mr Hoile as to who the beneficiaries of the Smartcard Trust were. Mr Hoile argued it was irrelevant as to who the beneficiaries of the trust are. I reject that contention. I have no knowledge as to EGR’s ability to meet costs in these proceedings if it were to be joined as a party. It is a trustee and any action it would take must be for the benefit of the beneficiaries. In those circumstances, the beneficiaries needed to be identified so that the Court and the other parties to the litigation can know whether those beneficiaries might be in a position to both finance the proceedings and to meet any adverse orders for costs. It seemed to me also relevant to know whether the beneficiary is in fact Ms Tomazos.
47. EGR is a trustee company for a beneficiary it will not disclose. Ms Tomazos is EGR’s sole director. I have no information as to EGR’s financial position. As a trustee it probably would have recourse to the trust’s assets to finance the proceedings but I have no information as to the trust’s assets and liabilities. I have not any information as to the abilities of EGR to employ solicitors to prosecute these proceedings or to pay costs in the event that the proceedings were unsuccessful.
48. The circumstances giving rise to the purported assignment are entirely unsatisfactory. The applicant did not disclose to this Court at any time that it had entered into a Deed to assign the chose in action to its director, who was also a director of its shareholder. It allowed the Court to proceed under the misunderstanding on 27 May 2010 that the applicant was entitled to maintain these proceedings in their entirety. It seems to me that EGR is in a position of conflict with the applicant in that the applicant has applied to set aside the assignment and, in those circumstances, it would be inappropriate for EGR to be entitled to prosecute this action.
49. This is not a case in which it would be appropriate to allow the contributory to maintain the action under the name of the applicant in circumstances where the contributory is under the control of a director who has, whilst a director of the applicant, failed to disclose to this Court the existence of the Deed of Assignment and who entered into the further Deed of 25 June 2010 after an exchange between counsel for EGR and the Court. I am not satisfied that EGR would be a fit and proper person in the corporate sense to maintain the proceedings.
50. In my opinion, insofar as this Court has power to allow these proceedings to be maintained by EGR, that is a power which should not be exercised in the circumstances of this case.
51. The application is dismissed. I will hear the parties as to costs.
    

I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Associate:

Dated: 2 February 2011