Case: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314
Outcome: cited
471B of the Corporations Act itself is silent as to the principles pursuant to which leave to proceed will be granted: King v Yurisich [2006] FCA 1369 at [13] . The court's discretion is broad but not absolute, and must be exercised fairly. It can only be exercised if a serious question is shown: King v Yurisch [2006] FCA 1368 ; (2006) 59 ACSR 598 at [9] [15]; Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 556. The test which is akin to that of whether there is a "serious question to be tried" as applied in interlocutory injunctions: Vagrand at 556. The authorities have not established an exhaustive list of the circumstances in which it may be appropriate for the Court to grant leave to proceed: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 at 317G per McPherson J (with whom the Court agreed). As was stated by McPherson J in Re Gordon Grant and Grant Pty Ltd (and as was approved by the Full Federal Court in Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 555): The question whether a claimant should be permitted to proceed by action, or should be required to submit his proof of debt and, if dissatisfied, appeal to a judge, is therefore reduced largely to one of choosing between alternative forms of procedure: at 317E. However it is for Merrill Lynch to demonstrate that one procedure, civil litigation, rather than another, the proof of debt process, is more appropriate in all the circumstances: Re Gordon Grant and Grant Pty Ltd at 317. The starting point is that a claimant must lodge a proof of debt unless that person can demonstrate there is good reason to depart from that procedure. The rationale for this approach is that a liquidator's attention and resources should not be diverted by litigation where there is a simpler procedure available, by way of proof of debt, with a right of appeal under s 1321 of the Act: Re Gordon Grant and Grant Pty Ltd at 317; Commonwealth v Davis Samuel Pty Ltd (No 5) [2008] ACTSC 124 at [33]. Claims for unliquidated damages in contract, and for misleading or deceptive conduct, are admissible to proof in a liquidation: Re Gordon Grant and Grant Pty Ltd at 317; Meehan v Stockmans Australian Caf&eacute; (Holdings) Pty Ltd (1996) 22 ACSR 123 at 128. See generally: Re Gordon Grant and Grant Pty Ltd at 317; Commonwealth v Davis Samuel Pty Ltd at [30], [32]; Lawless v Mackendrick (No 2) [2008] WASC 15 at [35] ; Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (Receivers and Managers Appointed) (in liq) (No 2) [2009] FCA 42 ; Ingot Capital Investments Pty Ltd and Ors v Macquarie Equity Capital Markets Pty Ltd and Ors [2004] NSWSC 406. Merrill Lynch submits that while it may be accepted that the starting position is that there should be good reason to depart from the proof of debt procedure in favour of Court proceedings ( Re Gordon Grant and Grant Pty Ltd at 317E-F; King v Yurisich at [13], 600), each of the first five factors above weighs heavily in favour of the grant of leave in the circumstances of this matter. Courts have dismissed applications for leave to proceed against a company in liquidation under s 471B in circumstances including: (a) where leave is sought in third party proceedings which would slow the liquidation to the pace of an action under the control of others, and where the issues in the third party proceedings are distinct from those in the primary proceedings: Re Gordon Grant and Grant Pty Ltd , 319 320. (b) where the claimant fails to adduce evidence demonstrating any seriousness or complexity to the claim, or the existence of a serious dispute: Nu Life Air Conditioning Pty Ltd v Reef Building Contractors Pty Ltd [2006] NSWSC 1245 at [7] ; (c) where the claimant asserts liability and sought a declaration of entitlement to be paid, of a type provable in liquidation: HP Mercantile v Australian Rural Group [2005] NSWSC 895 at [31] [32]; (d) where the claim is too onerous on a liquidator, even if it may not be capable of resolution by the lodging of a proof of debt: for instance, where the company in liquidation is an insurer, and 'the disruption to the work of the provisional liquidators and the expense which would be occasioned by dealing with [claims] on an ad hoc basis would unduly prejudice the creditors as a whole': Roots v Trussmaster Pty Ltd [2001] QSC 295 at [8] ; (e) where the proceeding would dissipate funds otherwise available to the creditors in circumstances where the liquidators agreed to admit a proof of debt in the entire amount of the claim: Rodgers v Schmierer, In the matter of Reader [2002] FCA 717 at [15] [16].