Personal Injuries proceedings where the respondent is in liquidation.
Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QCA 137
RCR O’Donnell Griffin Pty Ltd (in liq) (‘the respondent’) entered into a head contract with Sun Metals Corporation Pty Ltd for the performance of certain works at the Sun Metals Solar Farm Project Site (‘Sun Metal site’) in Townsville, Queensland.
The respondent subsequently entered into a subcontract with a labour hire company called Mass Solutions WA Pty Ltd (‘Mass Solutions’) (‘the subcontract’). Mr Palace (‘the appellant’) was a qualified electrician employed by Mass Solutions and identified as one of the personnel to be provided to the respondent under the subcontract for the performance of certain works at the Sun Metal Site.
The subcontract contemplated a degree of shared responsibility between the respondent and Mass Solutions for the safety of Mass Solutions’ employees, with Mass Solutions agreeing to indemnify the respondent against claims by any person in respect of personal injury. Significantly, under the indemnity clause, Mass Solutions’ liability to indemnify the respondent was to be ‘reduced proportionally to the extent that the act or omission of [the respondent] contributed to the loss, damage, death, or injury’. Also of importance, the respondent was insured for the applicant’s claim, subject to a $100,000.00 deductible.
The applicant was injured at the Sun Metals site in the course of his employment on 13 February 2018.
In March 2019, the applicant sought legal advice in relation to a common law claim for injuries personal injuries. In November 2019, the applicant commenced taking appropriate procedural steps pursuant to the Personal Injuries Proceedings Act 2002 (Qld) (‘PIPA’). Relevant documents were served on Mass Solutions and WorkCover. However, the applicant mistakenly served a company related to the respondent, not the respondent. In January 2020, the applicant’s solicitors learned the respondent was placed into voluntary liquidation on 26 March 2019. The applicant’s solicitors served PIPA notices on the respondent’s liquidators.
By way of originating application, the applicant sought leave to proceed against the respondent pursuant to s. 500(2) of the Corporations Act 2001 (Cth) (‘Corporations Act’) for injuries sustained on 13 February 2018. The primary judge refused to grant leave in respect of adding the respondent to the proceedings under both PIPA and s. 500(2) of the Corporations Act.
The issue before the Court of Appeal was whether the appellant should be granted leave to add the respondent to proceedings under s 500(2) of the Corporations Act 2001 (Cth).
Section 500(2) of the Corporations Act provides as follows:
“After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes” (my emphasis).
Section 500(2) holds in contemplation the creditors of the company in voluntary liquidation. The purpose of s. 500 is to stay ‘fruitless proceedings’ and ‘protect companies in liquidation from being harassed by unnecessary litigation’.
For this reason, s. 500(2) requires claimants ‘to adopt the ordinary procedure of lodging a proof of debt for their claims unless the claimants can demonstrate that there is a good reason why a departure from that procedure is justified’ (my emphasis).
In circumstances where the applicant can demonstrate some good reason why a departure from that procedure is justified, the Court in its ‘supervisory jurisdiction’ may exercise a discretion to grant leave for PIPA proceedings, subject to such terms as the Court sees fit.
In QNI Resources Pty Ltd v Park (2016) 11 ACSR 321, Bond J explained the applicant ‘need not demonstrate a prima facie case in the technical sense; rather, they must demonstrate the existence of a serious question to be tried as to their entitlement to the relief they claim’ (my emphasis).
The Queensland Court of Appeal, constituted by Sofronoff P and Morrison and Bond JJA, held the applicant demonstrated good reasons to justify a departure from s. 500(2) procedure and granted leave to commence proceedings.
The Court reasoned there was sufficient evidence provided by the applicant that justified an arguable case of at least a shared responsibility between the respondent and Mass Solutions, including:
the applicant had shown the case he wished to progress had sufficient merit in his statutory declaration, which provided a detailed explanation of the circumstances of the occurrence of the applicant’s injury;
there was evidence which justified an arguable case of at least a shared responsibility between the respondent and Mass Solutions, as articulated in terms of duty, breach and foreseeability, and expert opinion evidence ; and
the damages which the applicant might recover on the basis of the claim greatly exceeded the deductible for the insurance policy.
In respect of reasons 1 and 2 above, the combined weight of the evidence provided by the applicant demonstrated there was a relevant serious question to be tried concerning the responsibility of the respondent for the injuries the appellant sustained in the course of his employment.
In respect of reason 3 above, the Court followed the analysis by Zeeman J in Oceanic Life v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516:
“It has been common to grant leave for the commencement or continuance of proceedings for damages against a company which is in the course of being wound up in circumstances where the company is insured against its liability to pay those damages and the costs of defending the proceedings…”
The Court of Appeal found the existence of the insurance policy indemnifying the respondent against the alleged liability supported the applicant’s case in support of the grant of leave.
The Court of Appeal granted leave, however qualified its grant of leave subject to the condition that the applicant would not seek to enforce any judgment he obtained without first obtaining the leave of the Court. In this way, the applicant was granted his day in Court and the creditors’ interests were protected from being harassed by unnecessary litigation if subsequently at trial the applicant’s litigation was in fact found to be ‘fruitless’.
Relevance to Legal Practitioners:
Leave is commonly given to an applicant with a right to sue for damages where:
the applicant can demonstrate the existence of a serious question as to an entitlement to damages to be tried; and
the company is insured against the liability to pay those damages and the costs of defending.
The order granting leave is usually subject to a requirement that any judgment obtained against the company should not be enforced without the further leave of the court. In this way, the interests of both the applicant and the companies’ creditors are balanced.
This case note was prepared with thanks to Sarah Gough.
For the full decision : https://www.sclqld.org.au/caselaw/QCA/2021/137
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 Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QCA 137   Ibid   Ibid   Ibid   Ibid .  Ibid.  Ibid.  Ibid.  Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QSC 354 at  to .  Viscariello v Bernsteen Pty Ltd (in liq)  SASC 266  per Beskano J.  QNI Resources Pty Ltd v Park (2016) 116 ASCR 321 at 331-2  to  per Bond J.  Corporations Act 2001 (Cth) s. 500(2); QNI Resources Pty Ltd v Park (2016) 116 ASCR 321 at 331-2  to  per Bond J.  QNI Resources Pty Ltd v Park (2016) 116 ASCR 321 at 331-2,  to  per Bond J.  Corporations Act 2001 (Cth) s. 500(2).  Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QCA 137 .  QNI Resources Pty Ltd v Park (2016) 116 ASCR 321 at 331-2,  to  per Bond J.  See Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QCA 137 [14 to .  Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QCA 137 .  Palace v RCR O’Donnell Griffin Pty Ltd (in liq)  QCA 137 .  At 521.