Coastal Constructions Pty Ltd (in liq), Re [1994] QSC 100

) IN THE SUPREME COURT OF QUEENSLAND No. 145 of 1992 Brisbane Before Justice White [Re: Coastal Constructions Pty Ltd] IN THE MATTER of the Corporations Law and IN THE MATTER of Coastal Constructions Pty Ltd (in liquidation) - ACN 009 915 075 and IN THE MATTER of an Application for Leave to Proceed against Coastal Constructions Pty Ltd (in liquidation) REASONS FOR JUDGMENT - WHITE J. Judgment delivered CATCHWORDS: Counsel: Solicitors: Hearing Date: 28/04/1994 LEAVE TO PROCEED - Whether plaint would be renewed in District Court - Expiration of limitation period - Prejudice to Workers' Compensation Board alleged. Mr G Flint for applicant Mr L Stephens for respondent/Workers' Compensation Board Goss, Downey & Carne as town agents for Dale & Fallu for applicant Bradley & Co for Comp~nsation Board 14 April 1994 respondent/Workers' -- 1 of 15 -- ) ) ) ) --- ------------------------------ --- ---~-___j IN THE SUPREME COURT OF QUEENSLAND No. 145 of 1992 Brisbane Before Justice White [Re: Coastal Constructions Pty Ltd] IN THE MATTER of the Corporations Law and IN THE MATTER of Coastal Constructions Pty Ltd (in liquidation) - ACN 009 915 075 and IN THE MATTER of an Application for Leave to Proceed against Coastal Constructions Pty Ltd (in liquidation) REASONS FOR JUDGMENT - WHITE J. Judgment delivered 28/04/1994 The applicant seeks leave to proceed pursuant to s.471(2) of the Corporations Law, nunc pro tunc against the respondent company, Coastal Constructions Pty Ltd (in liquidation) in an action for damages for personal injuries sustained in the course of his employment with the company commenced by District Court Plaint No 351 of 1992 dated 2 September 1989 at Townsville. The application is opposed by the Workers' Compensation Board of Queensland ("the Board"), the insurer of the respondent company at the relevant time, on the ground that it is prejudiced by the delay in bringing this application in that a witness to the incident said to give rise to the injury has no recollection -- 2 of 15 -- ---- ----------- 2 of the applicant or any injury associated with him in the work place and that certain relevant documents can no longer be located. Briefly, the essential dates are these: 4 September 1989 5 September 1989 23 October 1989 _ 22 August 1991 19 March 1992 13 August 1992 Applicant injured at his place of work in the employment of the respondent company. Applicant made a claim to the Board for compensation for the injury occurring on 4 September 1989 and described circumstances of injury. Applicant's claim processed by the Board and claim re-opened and settled by payment on the Orthopaedic Board's assessment of disability. Respondent company ordered to be wound up by order of the Supreme Court of Queensland and order lodged with the Australian Securities Commission the following day. Present solicitors for the applicant wrote to the Board at its Toowoomba office: 11 We hereby confirm that we act on behalf of the above named concerning his proposed c c c c -- 3 of 15 -- ------------------- 3 master/servant action 11 2 September 1992 District Court plaint filed in Townsville by town agents on behalf of the applicant's present solicitors (the alleged injury occurred on a building site in Townsville). The applicant's ) solicitors then knew that the company was in liquidation, but Mr Leather, his solicitor, has ) sworn that there was insufficient time to obtain leave to proceed before the expiration of the limitation period. Mr Leather instructed Mr Longwill, another ) solicitor in the firm, in January 1993 to prepare an application for leave to proceed. Mr ') Longwill instructed counsel to prepare the material on 20 January 1993 and it was returned from counsel settled by 2 March 1993. Mr Longwill neglected to do anything about the matter thereafter - he did not proceed to instruct the applicant, nor to serve the plaint on the respondent company (subject to -- 4 of 15 -- '--------------~~~""---~--- 2 September 1993 1 December 1993 "4 January 1994 8 February 1994 4 leave being granted) or to note the expiry date of the plaint. Expiry date of plaint. Solicitor for applicant realised that the plaintiff's file had been overlooked, and that the plaint had not been served within 12 months. The Board sent notification of proposed application for leave to proceed, a copy of the District Court plaint and the affidavit in support. Application for leave to proceed filed returnable on 16 February 1994. Adjourned because not served -on respondent company (served on 14 March 1994). Adjourned from 16 February 1994 to 14 April 1994 from time to time to enable the Board to make inquiries. When the Board was appraised of the proposed application in early January 1994 its solicitors appointed assessors to investigate the claim.·" It already had a substantial file in relation to the applicant's claim arising out of his injury o~ 4 September 1989 which is exhibited to its material. In his plaint the applicant alleges that he was employed as a labourer c c c c -- 5 of 15 -- ) ) ) ) 5 on a construction site by the company_ In the course of his employment he was instructed, together with "another labourer", to carry a sheet 9f re-enforced steel mesh. In the process of doing so he alleges that a second sheet of mesh,. stacked against scaffolding, fell onto him and caused injury to his back. The solicitors for the Board sought the identity of the other labourer and have filed an affida~it from him, one Barry Burles, now living in Tasmania, who swears that he does not recall the applicant and has no recollection of a site accident involving mesh falling against any person in the course of his employment from August to December 1989. He does however recall a practice whereby employees, usually two or more, carried a sheet of steel mesh on that construction site. He can also recall the mesh being stacked against the scaffolding. Inquiries were also made of the foreman on site at the relevant time, the administration manager, the site manager and the project manager for the company, and none of them have any recollection of the applicant or of any accident at that site at that time. Mr Stobie, solicitor for the Board, has sworn that the wage records for the respondent company for the period when the applicant worked for it would be useful but that an employee of the liquidators has informed him that she was presently unable to locate those records. Mr Stephens, for the Board, submitted that the plaintiff has no prospects of success in the action because a District Court would not renew the plaint. The principles to be applied in a leave to proceed application against a company in liquidation have been -- 6 of 15 -- /I -------~-------- ~- ---------- 6' conveniently collected in the judgment of Master Lee Q.C. (as his Honour'then was) 'in Re Gordon Giant and Grant Pty Ltd (1982) 1 ACLC 196 at p.199 (reported as Ex parte Walker (1982) 6 ACLR 423 at pA26). ''1. An application for leave nunc pro tunc to commence any action or to continue any action which was commenced without obtaining leave may be given if good cause is shown on the merits: Australian Company Law and Practice (Wallace and Young) p.654. 2. Section 230(3) ensures that assets of the company in liquidation will be administered in accordance with the Act and that no person obtains an advantage to which, under the Act, he is not properly entitled. It enables the Court'effectively to supervise all claims brought against· the company: Re Sydney Formworks Pty.Ltd. (in lig.) (supra). 3. There must be no prejudice ·to the creditors or to the orderly winding-up of the company if the action is allowed to proceed: Re Sydney Formworks Pty. Ltd. (supra); , . Re A.J. Benjamin Ltd. (in lig.) and The Companies Act (supra). 4. The applicant's claim must be of a type which should proceed by action to judgment, rather than one which is capable of bein~ dealt with in an ordinary way by proof of winding-up: Century Mercantile Co. v. Auckland Provincial Frui tgrowers Society ( 1-9 29) N.Z.L.R. 272; Batterson v. Miella Constructions Pty. Ltd. (1967) V.R. 349. 5. Leave is more likely to be granted where there is an insurance company standing behind the company to pay any judgment which the plaintiff ·might obtain against it. If successful, such an action is unlikely to prejudice the creditors or the company: Re Sydney Formworks Pty. Ltd. (in lig. ) (supra); Re A. J. Benjamin (in lig.) (supra); ·the section is not designed to protect an insurer. 6. A condition is often imposed that the plaintiff will not enforce any judgment against . the company without the leave of the Court. This ensures that the Court retains ultimate. control: -Re Sydney Formworks Pty. Ltd.(in lig.) (supra) and Re A.J. Benjamin Ltd. (in lig.·) (supra). 7. Mere dela'y i-tself in applying for leave will not prevent leave being granted. Leave is not to be withheld simply and solely as a punishment: Re A.J. Benjamin Ltd. (in lig.) (supra). c c c c -- 7 of 15 -- ) ) ) ) 7 8. Leave may be granted after the expiry. of. the relevant period of limitation, to continue an action commenced within the limitation period without the leave of the Court." In Vagrand Pty Ltd (in liquidation) v. Fielding (1993) 41 FCR 550; the Full Court of the Federal Court (upholding the decision of Morling J) quoted with approval from the judgment of McPherson J in Ogilvie-Grant v. East (1983) 1 ACLC 742 at p.743~5, where his Honour observed: "It, of course, follows that it is quite impossible to· state in an exhaustive manner all the circumstances in which leave to proceed may be appropriate, but in the past they have been said to include factors such as 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." The Full Court concluded at p.566: "Upon a close reading of the relevant authorities, it is apparent to us that the Courts have not in fact required applicants for leave to demonstrate a prima facie case against the company in liquidation, in a technical sense of that term. They have required to be affirmatively satisfied that the claim has a solid foundafion and gives rise to a. serious dispute. Having regard to the course actuaily taken by· the Courts, the term 'prima facie caset is misleading. · Perhaps it should be avoided in the future~ The test which has actually been applied is akin to that now used in considering whether interlocutory, relief should be granted: 'a serious question to be tried'.'' There is no doubt that the applicant's claim is of a type which should proceed by action to judgment rather than one which is capable of being dealt with in the ordinary way by proof in a winding up. In this case there is an insurer standing behind the company to pay any judgment which might be obtained against the company and such an action will thus not prejudice the rights of the creditors. -- 8 of 15 -- 8 The issue then is whether there· is a serious question for determination by-a District Court for leave to renew the plaint. The subject ~atter of the pla~nt clearly reveals a serious matter to be tried relating-to the employer/employee relationship. Rule 52 of the District Court Rules provides that no plaint shall be in force without service for more than 12 months from its date of presentation, but if any defendant has not been served withiri that time the plaintiff may, before the expiration of the 1 2 months, apply in writing to the Registrar of the Court ( for leave to renew the plaint. Rule 53 provides, relevantly: "The Registrar, if sa-tisfied that reasonable efforts have been made to serve such defendant, and service has not been effected, or for other good reason, may order that the plaint be renewed for a further period not exceeding twelve months from the date of such renewal, inclusive of such date, and so on from time to time during the c~rrency of the renewed plaint, and the plaintiff may apply for such renewal accordingly. 11 ' It is clear that the applicant will rely upon "other good reason" c in seeking to have the plaint renewed. There is a discretion to ( renew a plaint, notwithstanding that at the time of the application the relevant limitation period has expired, Jones v. Gebras and Hill [1968] QDR 13, where Gibbs J (as his Honour then was), c6nsidering·RSC 9 R 1 (in ~imilar terms to rr. 52 and 53), thought that such an e~erdise was analogous to that which arises under RSC 90 R 9 - allowing a fresh step to be taken after three years. ·His Honour held at pp.23-4: "It is quite unnecessary in the present case to attempt to consider exhaustively what circumstances would and what would not .amount to· good reason for allowing a writ to be renewed on an application made after the expiration of twelve months from the issue of the writ; and after. "the. limitation period had expired. I am satisfied that in all the circumstances of the present case there is good reason why the time c -- 9 of 15 -- ) ) ) ") 9 should be enlarged and the writ renewed. The circumstances which lead me to this conclusion may be summarised as follows. First, Hill had been informed of the intention to issue the writ before it was issued. Secondly, the writ ~as served in due time on Hill's insurer which, under The Motor Vehicles Insurance Acts, 1936 to 1963 and Regulations thereunder, is liable to pay to the plaintiff the amount of any judgment that may be obtained against Hill and remains unsatisfied. · Thirdly, before the action was brought the insurer had been furnished with a number of reports bearing on the questions both of liability and quantum of damages. Fourthly, in all the circumstances it must be concluded that if the action goes on, Hill will not be prejudiced by the delay in serving the writ. Of course it may.be said that in one sense a defendant will always be prejudiced if a writ is renewed after the limitation period has expired, for he is rendered liable to judgment when he would not otherwise be liable. However that prejudice arises not from the delay but from the very fact·that the application is granted. Fifthly, the delay was not very great. Finally, the explanation for the fact that the writ was not served, and the application was not made, at an earlier date is that the plaintiff's solicitor was to some extent lacking in diligence when it was reported to him that Hill w~s on military service outside Australia. I do not suggest that any one of these matters would by itself have. amounted to good reason to renew the writ; I need not consider that question. The combined effect of these circumstances however convinces me that there is good reason to renew the writ, and that.·I should exercise my discretion in favour of renewing it, notwithstanding that the limitation period has expired and that the application was not made within twelve months from the issue of the writ." In Dempsey v. Dorber [1990] 1 Qd R 418, the Full Court in considering an application for leave to proceed under RSC 90 R 9 (which would pave the way for an application to renew the writ, which had not been served on the defendant) confirmed that similar considerations apply as on an application for renewal of the writ under RSC 9 R 1, Connolly J (with whom Carter and Moynihan JJ agreed), held at.p.420: " In my judgment, the proper approach to a question such as this is to identify the relevant factors, assess the weight to be given in the circumstances of the case to each of · them, and then to determine -- 10 of 15 -- 10. whether, on balance, there is good reason for. making the order. The other factor which will always be relevant where an application is made under 0.90 r.9 is whether the defendant is likely to suffer prejudice as a result of the delay. Sometimes, as in William Crosby, an examination of the history of the matter will reveal that the age of the dispute, its complexity, the nature of the evidence which will be required and the like make it inevitable that the defendant will be prejudiced in the preparation and conduct of the action. Thus it is commonly recognised that a witness actio~, which depends upon the recollection of those who must swear to events.and conversations, presents a situation in which the trial of the issues becomes increasingly diff:lcult and unsatisfactory with the passing of time. This will be so, even if it is not possible to point to the unavailability, for whatever reason, of a particular witness or the loss of relevant records." The Board file suggests that the_ applicant had been working for the company for two or three months at the time of· the alleged injury. In a statement to the Board dated 8 Set()ember 1989 the applicant said that he kept on with his work for the ' rest of the day after the,incident and resumed_work at 7 a;m. the c c next morning, but .reportE~d his injury at 8 a~m. because the pain ( ·• in his back was such that he could not continue. There were thus no features of the incident, on the materi~l, which would commend themselves to.a person not involved in it. Had the plaint been served ·near the end of its 12 month life, it may well have been the case that Mr Burles would have no recollection of it. There is no reason to suppose that.any of the_ applicant's superiors would recall hirn leaving .and why .. Mr Peppas, the administration manager, wrote to the Board on 7 November 1989 advising that the applicant "left our . employ, soon after the accident on the 4th September, 1989 ... " .. · c -- 11 of 15 -- ) ) ) ) --- ·----------·-·--~-.- 11 Dr Richard Gibberd, an orthopaedic surgeon, reported to the Board on 24 October 1989 that the applicant told him "Six weeks prior to my seeing him, while working with concrete, some reinforcement fell and he said he had to lift it off himself and this re-activated his back ache. 11 This suggests that Mr Burles may not have been involved in the incident although the applicant said on his claim form that he was present. In Traj v. The Cannery Board [1990] 1 Qd R 494 at p.496 Connolly J (with whom Carter and Moynihan JJ agreed), observed: " There is, of course, no excuse for the delay but the plaintiff is obviously the victim of the inaction of his former solicitors. It must also be remembered that a plaintiff cannot properly be penalised for delay up to the period of limitation. The period which elapsed since the arising of the cause of action can, of course, properly be regarded where prejudice to the defendant is raised but it is not a question of punishing the party for not issuing his plaint until the period of limitation has virtually expired. The relevant delay in this case is three months. It cannot be regarded as inordinate. The defendant on the other hand did not attempt to set up any specific prejudice, although it is, of course, entitled to rely on the well known fact that human memory tends to become less reliable with the passage of time. It does not, however, suggest that any witness, who would be necessary for the proper conduct of its defence, has become unavailable or to set up any other matter. of particular prejudice. It cannot, in particular, point to anything which has happened s~nce the plaint ceased to be in force which, as a matter of discretion, should ~ead the court to refuse to allow service which could have been effected with complete validity on the day before that event occurred. 11 As mentioned above, a non-specific reference to the applicant's "proposed master/servant action" was made in a letter from his present solicitors to the Board dated 13 August 1992. I· would not think that the applicant could rely on this as "notice" such that the Board ought to have started investigations as to liability. -- 12 of 15 -- 1 2 Although the circumstances-of the actual injury is a matter of importance, Mr Burles does say 'that he recalls the system of work whereby employees would be required to carry steel mesh and the safety or otherwise of such a system will be an important factor in the action. The other officers or former officers of the respondent company have not been asked about this matter and there is rto reason to suppose that, for example, the site manager or for~man woul~ not recall the system for moving the mesh. The Board submits that its inability to access wage records, at least for the present, prejudices its capacity to prepare for a trial. There are references throughout the Board file to the applicant's rate of pay at the time ~nd it is unlikely that the absence of the pay records would seriously impede the Board. The issue of quan·tum appears to be a much more significant aspect of the acti6n because the material in the Board file reveals that the· applic·ant had suffered prior back injury, had a degenerative c c condition in his· lumbar spine and was thought by a number of ( ~edicial ·practitioners to be exaggerating his symptoms. These matters were considered on behalf of the Board contemporaneously with the injury and during the re-opening of the claim in 1991. There appear~ to be no prejudice in that regard. It is not for me to decide whether the plaint should be renewed. That is a matter for the District Court. I must decide if there is a-serious question to be tried. The delay in seeking has not been inordinate, altho~gh at no stage has any sense of urgency been demonstrated even a£ter the realisation that the plaint was stale, and there is an explanation. · The observations of Mitchell J in Middletori v. Geary (1979) 24 SASR 239 that mere c -- 13 of 15 -- ------ ·----------~----·- ~----·-·~--_______.J 13 failure by a solicitor for a party to cause a writ to be served within 12 months does not of itself constitute good reason for the renewal of the writ, must be considered against the background of the failure by the plaintiff's solicitors in that case to answer any of the numbers of letters directed to them by the defendant and the prejudice to the defendant in the plaintiff not being available for a medical examination for a long period after the injury. In Dempsey v. Dorber, supra, there was ) extraordinary inaction on the part of the plaintiff's solicitors and Connolly J regarded such delay as one among a number of ) relevant circumstances. It is clear that the question of prejudice on the issue of liability is the significant factor for the District Court in assessing whether the plaint should be renewed. It is possible that the applicant will rely on further material in answer to the affidavits of the defendant. They were filed .by leave on the ) hearing of ·the application and there was no opportunity to ) respond. The applicant may set out in detail the circumstances surrounding the fall of the mesh and it may be that Mr Burles played little part in it. As Morling J observed in Fielding v. Vagrand Pty Ltd (1992) 39 FCR 251 at p.253: "No doubt it would be inappropriate to grant leave to proceed where the applicant does not have a genuine claim or when the claim is futile." I cannot conclude that the nature of the prejudice alleged is such that a District Court would be bound to dismiss an application to renew the plaint. Accordingly, the applicant is given leave to proceed.nunc pro tunc in an action commenced in the District Court at Townsville by Plaint No. 351 of 1992, on -- 14 of 15 -- 14 the condition that he does not seek to enforce any judgment obtained in his favour against the company without prior leave of the Court. It is customary in such applications to order that the costs of and incidental to the application for leave to proceed be costs in the cause. However, because there are features of delay which caused the Board's solicitors to be compelled to make detailed inquiries it may be that some other order is appropriate and I will hear submissions as to costs. c c ( ( -- 15 of 15 --