EMG Stone Pty Ltd v Gonda

1. [1]

   HIS HONOUR: EMG Stone Pty Ltd commenced these proceedings by summons filed on 3 May 2022. It seeks relief with respect to a determination by the NSW Civil & Administrative Tribunal concerning a dispute between the company and the defendants over the supply and installation of granite bench tops in the defendants’ dwelling in Jindabyne. The company had sought to recover $3,383 in unpaid charges for that job but the defendants cross-claimed alleging defective and incomplete work totalling approximately $15,000. On 26 May 2021, Tribunal Member Smith ordered the company to make good the works associated with the supply and installation contract upon which it would become entitled to the amount claimed. However, that did not occur and the defendants applied to bring the matter back. On 30 March 2022, Tribunal Member Smith ordered the company to pay the defendants $25,991.90, being the amount required to make good the kitchen to comply with the orders previously made.

2. [2]

   The summons is a challenging document. It is fair to say that the company effectively seeks to relitigate the whole of the contest determined unfavourably to it by Tribunal Member Smith. In response to the summons, the defendants have filed two notices of motion, the first on 2 June 2022 and the second on 1 December 2022. The motions came before me on 6 December 2022 for determination. In combination, the defendants move the Court for the following relief:

   1. (1)

      To the extent required, an order granting leave to the defendants to continue these proceedings against the plaintiff (in liquidation) pursuant to s 471B or s 500(2) of the Corporations Act 2001.

   2. (2)

      An order that the plaintiff’s summons filed 3 May 2022 be struck out for lack of jurisdiction as failing to be an “appealable decision” in accordance with s 82(1) of the Civil and Administrative Tribunal Act 2013.

   3. (3)

      Alternatively, an order that the summons be set aside under UCPR 12.11(1)(a) or otherwise dealt with under UCPR 12.11(1)(g) or (h), 13.4(1)(b) or (c) or 14.28(1)(a) or (c) or 50.16A(1).

   4. (4)

      An order that the Court determine the defendants’ costs of these proceedings fixed in the sum of $15,363 be paid by the plaintiff or Saad Asaad, Bimal Bhandari and Nilawali Ayoub pursuant to s 98 of the Civil Procedure Act or as the Court may otherwise determine.

   5. (5)

      Interest.

3. [3]

   The evidence establishes that the plaintiff went into voluntary liquidation pursuant to a resolution passed on 17 November 2022. Mohammad Najjar was appointed as the company’s liquidator. Mr Najjar advised by letter dated 1 December 2022 that his recommendation was that the present proceedings be dismissed “given the current external administration status of the company”. Mr Najjar also advised in his letter that he neither consented to nor opposed the proceedings continuing “should the parties think otherwise”. Mr Najjar expressly indicated that whatever course were adopted, he did not wish actively to participate in the proceedings.

4. [4]

   When the proceedings were called on for hearing, there was no appearance for the plaintiff. My Associate received an email attaching a medical certificate dated 2 December 2022 from Dr Paul Placanica indicating that Saad Asaad, (the director of the plaintiff) was suffering from severe anxiety and distress, was not medically fit to attend court and sought an adjournment. My Associate did not otherwise receive any communication by or on behalf of Mr Asaad in which he sought an adjournment of the proceedings or any other concession. I am satisfied that the plaintiff and Mr Asaad have received notice of the defendants’ proposal to move the Court for the orders referred to earlier in these reasons.

5. [5]

   Sections 471B and 500(2) of the Corporations Act are relevantly as follows:

6. [6]

   In my view, the defendants do not require leave to prosecute their motions against the company. The nature of the various forms of relief that the defendants seek against the plaintiff are not within the ambit of s 500(2) as they are in effect defensive procedural measures. In BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 at 859, the Supreme Court of Western Australia held that leave was not required for an application for security for costs against a company that has gone into liquidation on the basis that s 471B applied to proceedings initiated against a company in liquidation and not “defensive procedural measures” by defendants in proceedings initiated by the company. In Zervas v Burkitt [2019] NSWCA 112 at [11], Gleeson JA concluded that there “are authorities that a ‘defensive proceeding’ is not subject to the requirement of leave under s 471B or s 500(2) of the Corporations Act”.

7. [7]

   Even if that conclusion were wrong, I would in any event have been inclined to grant leave. That is particularly so having regard to the attitude expressed by the liquidator and the absence of any representation by the plaintiff, an entity obviously separate and distinct from Mr Asaad whose indisposition is not challenged.

8. [8]

   Sections 82(1) and 83(1) of the Civil and Administrative Tribunal Act provides as follows:

9. [9]

   Neither of the determinations of Tribunal Member Smith was an appealable decision. Even if that were not so, neither decision is the subject of an application for leave to appeal nor a question of law.

10. [10]

    It should also be noted that the plaintiff filed a summons commencing an appeal in the District Court on 30 March 2022. It is identical in form and substance to the summons filed by the plaintiff in these proceedings. The defendants filled a notice of motion in that Court seeking orders to have the plaintiff’s summons struck out for want of jurisdiction, relying on the same grounds as those relied upon for the same relief in this Court. On 2 May 2022, Judicial Registrar Howard heard the plaintiff’s summons and the defendants’ notice of motion. He dismissed the summons for lack of jurisdiction and ordered the plaintiff to pay the defendants’ costs of the summons of $5,349.

11. [11]

    In the circumstances of this case, there is no reason why a similar order should not be made by me. Moreover, having regard to the history of the proceedings so far, and to the matters described in detail in the summons, I would be inclined on the court’s own motion summarily to dismiss the proceedings pursuant to UCPR 13.4 or the inherent power of the Court as it appears to me that they disclose no reasonable cause of action and are otherwise an abuse of the process of the Court.

12. [12]

    The defendants have filed evidence that establishes that their costs of responding to the plaintiff’s summons up to and including 6 December 2022 amount to $15,363.13: see pages 180 - 182 of the Court Book. The defendants seek a specified gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 for the payment of those costs calculated on an indemnity basis. Mr Charles submitted that there was little if any realistic or convenient prospect that the costs, if ordered against the plaintiff, would be recovered. It was for that reason that he also seeks a non-party costs orders against the named individuals. The characterisation of the costs as indemnity costs is strictly unnecessary as Mr Charles, solicitor, who appears for the defendants has acknowledged that the specified gross sum sought represents the whole of the costs incurred by the defendants.

13. [13]

    I consider that a specified gross sum costs order in the amount claimed should be made. The amount is small. The costs of an assessment are disproportionate to the amount in question. The summons is unmeritorious and the costs should follow the event of its dismissal.

14. [14]

    However, while I appreciate the practical strength of submissions that a non-party costs order should also be made, I have some difficulty with the proposition that the named non-parties are not in a similar position to Mr Finnerty in PM Works Pty Ltd v Management Services Australia Pty Ltd trading as Peak Performance PM [2018] NSWCA 168 in which the following remarks of the trial judge were cited with approval by Leeming JA in the Court of Appeal:

15. [15]

    The power under s 98(1) of the Civil Procedure Act extends to making a costs order against a non-party: Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 at [136]. The decision to order costs against a non-party is an exercise of the Court's discretionary power. It is unfettered: there is no onus of proof in the application for the exercise of the discretion: Ipex ITG Pty Ltd (in liq) (receivers appointed) v Victoria (No 2) [2014] VSCA 315 at [45]. Even so, there is an established category of case where the power may be exercised. In Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 192-193; [1992] HCA 28, Mason CJ and others said this:

16. [16]

    A case will fall within the established category if three elements exist, namely the plaintiff is a man of straw, the non-parties have an interest in the subject of the litigation and they have played an active part in the conduct of the litigation. In such a case, a costs order may be made against a non-party if the interests of justice require.

17. [17]

    In Knight v FP Special Assets, Dawson J (at 202) referred to a costs order being made against the "effective litigant standing behind an actual party". There is no significant difference between the approach of Dawson J and that of the Chief Justice. Both approaches direct attention to the "real party": FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 at [205]. Reference to the "real party" is to be understood as a reference to a real party, even if not the real party: Ipex ITG Pty Ltd v Victoria (No 2) at [36]. In that case, the Court held that a non-party who was a beneficiary of a discretionary trust and director of the trust company that "may well" have had the power to distribute the proceeds of litigation to himself should be ordered personally to pay the costs of proceedings unsuccessfully brought by the trustee: Ipex at [41]. Ultimately it is a question of the interests of justice: Brand2Content t/as Franchise Works v Dalby [2019] NSWCA 16 at [12].

18. [18]

    The defendants submitted that this case falls clearly within the category of cases referred to in Knight v FP Special Assets.

19. [19]

    I am not satisfied that the interests of justice favour the making of the orders sought. As far as the evidence indicates, the plaintiff was in the business of supplying granite benchtops and related products and services. It was not, for example, a special purpose vehicle incorporated in order to conduct spurious or questionable litigation in a way designed cynically to shield its controlling minds from potentially likely adverse costs orders. As far as I can determine, Mr Asaad and the others named in the defendant’s notices of motion, carried on their business in a legitimate fashion through the medium of the plaintiff in what might be described as the usual way. The fact that Mr Asaad may have felt aggrieved by the unfavourable decision of the Tribunal or the Judicial Registrar, and persisted with ill-advised, not to say hopeless, litigation in an attempt to vindicate his view, is not in my mind so unusual as to warrant lifting the corporate veil.

20. [20]

    I am not prepared to make the non-party costs orders that are sought.

Orders

1. [21]

   In the circumstances I make the following orders:

   1. (1)

      Dismiss the summons pursuant to UCPR 13.4.

   2. (2)

      Order the plaintiff to pay the defendants’ costs calculated as a specified gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 in the amount of $15,363.13.