Case: Lloyd-Owen v Bull [1936] 4 DLR 273
Outcome: followed
statutory predecessors of these provisions were identified by the Privy Council in Ferguson v Wallbridge [1935] 3 DLR 66 at 83-84 (in a quotation cited in related proceedings by their Lordships in Lloyd-Owen v Bull [1936] 4 DLR 273 at 275-276) as evincing a statutory policy that all claims competent to a company should be brought within the scope and control of the winding up. In Lloyd-Owen [1936] 4 DLR at 276 Lords Blanesburgh, Thankerton and Roche said that the approach of the Court to an application under the analogue of s 511 was as follows: "A Judge in winding-up is the custodian of the interests of every class affected by the liquidation. It is his duty even if it be in a voluntary liquidation that opportunity offers to see to it that all assets of the company are brought into the winding-up. In authorizing proceedings, especially if they may or will involve some drain upon the assets, he must satisfy himself as to their probable success; where, as in the present case, they involve no possible charge on assets, he will nevertheless be careful to see that any action taken in the company's name under his authority is not vexatious or merely oppressive ." (emphasis added) In Aliprandi v Griffith Vintners Pty Ltd (in liq) (1991) 6 ACSR 250 at 252 McLelland J applied what their Lordships had said in Lloyd-Owen [1936] 4 DLR at 276 as to the approach to be taken by the Court. His Honour had noted in an earlier decision ( Wenham v General Credits Ltd (unreported 16 December 1988 Supreme Court of New South Wales at pp 21-22; BC8801203)) that there were two procedural methods by which the joinder as a plaintiff or co-plaintiff of a company being wound up could be made. The first method was by the Court giving a direction to the liquidator to cause the company to be joined as a co-plaintiff pursuant to the analogue of ss 477(6) or 511 (2). The second method was to order that the creditor or contributory be authorised to use the company's name as a co-plaintiff in the proceedings. McLelland J said that that procedure was "... of respectable antiquity and is sanctioned by high authority" citing among others the decisions in Lloyd-Owen [1936] 4 DLR 273 and Cape Breton Co v Fenn (1881) 17 Ch D 198 at 207, 208, where Jessel MR had said that the principle was based on the same one in the old Court of Chancery that permitted a beneficiary to bring a bill against his trustee so as to use the trustee's name to recover trust property. These proceedings are not a rehearsal for a trial. The limited question, identified in the authorities, is whether a sufficiently arguable claim has been brought by a proper applicant to warrant the exercise of the power to authorise that person to litigate in the company's name. It would be wrong, as their Lordships pointed out in Lloyd-Owen [1936] 4 DLR at 277, to pour over the examination transcripts or other material with a view to determining prospects of success. That is not the role of the Court in such applications. Rather, the Court's role is to be satisfied that it is a proper use of the procedure afforded in the winding up to allow the company or its name to be used to recover debts, damages or assets, or to otherwise protect the interests of the company so as to realise the company's property for the purposes of the winding up. I am satisfied that the claim sought to be made against each of the proposed respondents by PAAN in the draft statement of claim is not vexatious or oppressive. I am satisfied that I should make an order to the effect that, subject to the Commissioner providing an indemnity to the liquidator and to PAAN in respect of costs to be incurred by PAAN or which it may be ordered to pay in the proposed proceedings and providing security in respect of that indemnity, the terms of such indemnity and the nature and amount of such security to be agreed between the Commissioner, the liquidator and PAAN or, failing agreement, settled by the registrar: (a) the Commissioner be authorised at his own expense and risk as to costs, to use the name of PAAN as a plaintiff or co-plaintiff in the proposed proceedings; (b) the Commissioner indemnify the liquidator for all costs reasonably incurred by PAAN in respect of the proposed proceedings. The Commissioner should be allowed to file a pleading in the form of the draft statement of claim. There was no accompanying draft application in evidence. Before the draft statement of claim is filed some typographical and consequential amendments may need to be made to it that will not affect the substance of the pleading. Once the proceedings are commenced they will be in the control of the Court which will be able to regulate any subsequent applications to amend and, if necessary, any consequential requirement to vary the authorisation I have granted.