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Smart Company Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd [2011] FCA 35

by Martha.Ware 20. April 2011 08:44


Enterprise Global Resources Pty Ltd (“EGR”) made an application to intervene in the proceedings pursuant to ss 236 and 237 of the Corporations Act. EGR is the Applicant’s sole shareholder.


At the hearing, EGR sought to vary the notice of motion to be granted leave to continue the proceedings with respect to the Trade Practices Act, Fair Trading Act and breaches of fiduciary duties in the name of the Applicant and that it be joined as co-applicant for the remaining causes of action.


Section 236 has no operation where the company for which the member seeks to intervene is in liquidation: [8].


EGR relied on the court’s inherent jurisdiction to make an order allowing a contributory, who is a company member, to prosecute a proceeding where the company will not do so: [10].


A deed of assignment was executed purporting to assign the Applicant’s chose in action to Mrs Tomazos. A second deed purported to appoint Mrs Tomazos as trustee of a trust which EGR was also a trustee of and took assignment of the chose in action as a trustee of the trust. A third deed purported to assign the chose in action from Mrs Tomazos to EGR, as trustee. This deed was entered into after the Court raised the issue of Mrs Tomazos having conflicting interests.


The circumstances of the purported assignment and the further deeds raised serious doubt about the transactions validity: [32]. If valid, the Applicant’s sole asset, the chose in action, was assigned to its shareholder on behalf of a beneficiary, defeating the claims of unsecured creditors: [33].


The Supreme Court held the assignments were void: [38].


EGR could not be allowed to be joined as co-applicant or be given leave to continue the proceedings where the assignments were void: [40]. Even if assignments were not void, they did not assign any of the statutory causes of action to EGR and the different causes of action arising out of the same facts would have to be separately prosecuted: [41].


The court has a residual power in the course of a winding up to allow proceedings to be brought on behalf of a company by a member or creditor: [43]. It is not used unless the Court is unless satisfied proceedings taken in the company name are not vexatious or oppressive. These proceedings were not.


The Liquidator opposed this application: [45].


The Applicant would not identify the beneficiaries of the trust. It was relevant as the Court did not know if ERG was able to meet costs orders if joined.


The Applicant had applied to set aside the assignment therefore it was inappropriate for EGR to prosecute this action: [48].


The court was not satisfied that EGR was a fit and proper person in the corporate sense to maintain the proceedings: [49].


EGR’s motion was dismissed.

Relevant paragraphs of Ford

[10.071], [10.230], [10.420], [11.240], [11.250], [11.255], [11.260], [11.265], [11.760]


Ford's Principles of Corporations Law


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