Allatech v Construction Management Group [2002] NSWSC 293

NEW SOUTH WALES SUPREME COURT

CITATION: Allatech v Construction Management Group [2002] NSWSC 293

CURRENT JURISDICTION: Equity

FILE NUMBER(S): 1053/02

HEARING DATE{S): 5 April 2002

JUDGMENT DATE: 11/04/2002

PARTIES:

Allatech Pty Ltd (P)

Construction Management Group Pty Ltd (D1)

Peter Hillig (D2)

JUDGMENT OF: Austin J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

A Spencer (P)

M Jacobs QC with S Jacobs (D1)

N France (D2)

SOLICITORS:

Harris & Company (P)

James Legal (D1)

Watson Mangioni (D2)

CATCHWORDS:

CORPORATIONS - deed of company arrangement - standing to apply for orders terminating deed under s 445D - whether plaintiff who claims to be a creditor has standing as an 'other interested person' under s 445D(2)(c)

ACTS CITED:

Administrative Appeals Tribunal Act 1975 ss 27, 30

Corporations Act 2001 (Cth) ss 445D, 445G, 447A, 447E, 449D

Supreme Court Rules Pt 31 r 2

DECISION:

Determined as a separate question that the plaintiff is an 'other interested person' within s 445D(2)(c) of the Corporations Act

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

AUSTIN J

THURSDAY 11 APRIL 2002

1053/02 ALLATECH PTY LTD V CONSTRUCTION MANAGEMENT GROUP PTY LTD & ANOR

JUDGMENT

HIS HONOUR: Background facts

1 The plaintiff ("Allatech") and its associated company, Franks Centre Lofts Pty Ltd ("Franks"), are property development companies. From 1999 to 2000 Allatech was the developer of a project at Prestons for the construction of stage one of a retirement village known as the Blue Hills Retirement Village. On 8 February 1999 Allatech and the first defendant ("CMG"), a building company, entered into a civil works contract for the provision of road construction, water, sewerage reticulation, plumbing, drainage, gas and fire services for the retirement village. On 10 February 1999 Allatech and CMG entered into a building works contract for the construction of 24 residential units at the retirement village.

2 From 1997 to 2000 Franks developed a project at Camperdown for the conversion of an industrial warehouse and construction of five buildings, to produce 46 residential units, known as the "Union Square Development". Franks entered into a contract with CMG for that purpose.

3 In October 1999 Allatech purported to terminate its building contract with CMG, and gave a notice to CMG under the civil works contract purporting to take the work remaining under that contract out of the hands of CMG. A firm of architects called Robert Peck Von Hartel Trethowan ("Robert Peck") issued a letter which, according to Allatech, is or encloses a certificate under clause 12.05.04 of the building contract. The certificate purported to determine that CMG owed Allatech an amount of $112,301. A document was also issued under the civil works contract, which Allatech claims to be a certificate under clause 44.6 of the contract. The certificate purported to determine that CMG owed Allatech an amount of $16,908 for completion of the Blue Hills development. Consequently Allatech claims that CMG owes it a total amount of $129,209 under the building contract and the civil works contract.

4 On 15 June 2000 the second defendant, Mr Hillig, was appointed voluntary administrator of CMG. The first meeting of creditors was held on 22 June 2000. On 4 July 2000 Mr Hillig circulated to creditors a document called "Proposal Report to Creditors" ("Report") which recommended that the creditors consent to CMG entering into a deed of company arrangement. The Report said that the company had ceased to trade prior to Mr Hillig's appointment as voluntary administrator. It said that the directors of CMG attributed the failure of the business to the failure of Allatech and Franks to pay to CMG debts of $3.1 million and $2.25 million respectively. The Report identified legal proceedings that had been commenced by CMG for recovery of its claims, and said that although the directors believed that the litigation had good prospects of success, funding for the litigation was not available from the company's resources.

5 The deed of company arrangement recommended by Mr Hillig was entered into on about 28 July 2000, pursuant to a resolution of the creditors of CMG. The deed is essentially a mechanism for enabling the litigation to be continued. It provides that the directors of CMG will be responsible for pursuing the company's litigation claims, subject to an obligation to report to the deed administrator (Mr Hillig), and that the directors will fund the litigation. The proceeds of any of the litigation claims are to be applied towards costs and experts' fees, and towards provisions for future litigation costs, and any surplus is to be paid into a deed fund. The deed fund is to be used to pay the costs of the deed administration and the debts owing to CMG's creditors.

6 The litigation comprises several proceedings. Matter No 55021 of 2000 is a case in the Construction List of this Court, in which CMG seeks a declaration that Allatech repudiated the building contract and the civil works contract for the Blue Hills project, and recovery for work done on a quantum meruit basis. Allatech has cross-claimed against CMG for the amount which it alleges to be owing under the building contract and the civil works contract for the Blue Hills project.

7 Matter No 55017 of 2000 is also a Construction List matter, in which Franks claims liquidated damages and damages from CMG for loss of profits, finance holding costs, increased costs of construction and defective work, and CMG makes a cross-claim. There are proceedings between CMG and a company called Supreme Linings Pty Ltd in the District Court and this Court. Matter No 20354 of 2001, commenced well after the deed was executed, is a common law case in the Professional Negligence List of this Court, brought by CMG against its former solicitors Blessington Judd, seeking damages, or an indemnity in respect of any award for damages the might be made in favour of Franks in the Supreme Court proceedings.

8 Allatech alleges that a company called Civil Management Group Pty Ltd ("Civil"), associated with the directors of CMG and their joint venture partner Mr Josef, was established to take over the business operations of CMG. Allatech contends that when CMG obtained a valuable civil works contract for the Macquarie Links Project, the directors of CMG caused CMG to incur the expenses of the project, while the profit of the project was diverted to Civil. Further, Allatech contends that from August 1998 to March 2000 Civil competed with CMG for other commercial opportunities for carrying out civil works. These activities, according to Allatech, constituted breaches of fiduciary duties by CMG's directors.

9 Allatech has commenced the present proceeding for an order under s 445D (1) of the Corporations Act terminating the deed of company arrangement and for an order for the appointment of a liquidator to CMG. It alleges that the circumstances constituting the breaches of fiduciary duties by CMG's directors ought to have been disclosed to creditors in Mr Hillig's Report, but they were not disclosed. It also says that the Report should have disclosed the cause of action against Blessington Judd, against whom proceedings were not commenced until May 2001. It makes various other complaints about inadequate disclosure in the Report.

10 The matter first came before me in the Corporations List on 18 February 2002, and since that time I have endeavoured to manage the case so that interlocutory issues can be resolved and the proceeding can be prepared for expeditious hearing. There have been various interlocutory applications about production of documents, striking out pleadings, stay of other proceedings, security for costs and other matters. At one stage counsel for Allatech prepared a list which identified eight unresolved interlocutory applications.

The separate question as to standing

11 It emerged during various submissions that a principal issue between the parties relates to Allatech's standing to bring the present proceeding. Section 445D (2) provides:

"An order may be made on the application of:

(a) a creditor of the company; or

(b) the company; or

12 Allatech contends that it is a creditor for amounts certified under the building contract and the civil works contract for the Blue Hills project, but its contentions are hotly disputed and are in issue in the Construction List proceeding No 55021 of 2000. Counsel for CMG contended that it would be necessary to resolve in the present proceeding the same issues as were before the Court in the Construction List proceeding, because the question of standing would necessarily involve the determination of the question whether Allatech is a creditor of CMG. Counsel for Allatech replied that it would be unnecessary to decide in this proceeding whether CMG in fact owes money to Allatech, because Allatech has standing as an "interested person" under s 445D (2), whether or not it is in fact a creditor.

13 The issue of standing is an important one for proper case management. If Allatech has standing to seek an order under s 445D as an "other interested person", without having to show that it is in fact a creditor of CMG, the final hearing of the present proceeding will focus on the alleged informational deficiencies of Mr Hillig's Report, including the alleged failure of the Report to disclose matters going to breach of fiduciary duties by the directors of CMG. The final hearing of that case should take no more than five days. If, however, it is also necessary for Allatech to show that it is in fact a creditor of CMG in order to demonstrate its standing under s 445D (2), it seems likely that the hearing will be much longer. I was informed from the bar table by counsel for CMG that this very issue has been referred to the Hon Morton Rolfe QC by orders made in the Construction List proceeding, and that a hearing of about three weeks before the referee is anticipated. Indeed, CMG made an interlocutory application for a stay of the present proceeding pending the outcome of the Commercial List proceeding before the referee.

14 Counsel for Allatech informed me that if I were to decide the separate question in his client's favour, he would seek to amend the statement of claim so as to remove the pleading of facts going to the question whether Allatech is a creditor, except where those facts also support his client's estoppel argument.

15 I decided that in these circumstances, the present case is one of those unusual cases when it is appropriate to embark on the determination of a separate question under Part 31 of the Supreme Court Rules. Accordingly on 26 March 2002, after hearing submissions on the form of such a separate question, I made an order in the following terms:

"Order under Part 31 of the Supreme Court Rules that the following question be determined separately from all other questions before the determination of the First Defendant's application for a stay of proceedings:

"Is the plaintiff an "other interested person" within the meaning ascribed to that term by section 445D (2) (c) of the Corporations Act?"

The Court notes that the Plaintiff will not contend, for the purpose of determination of the separate question, that it is an other person by reason of the fact that it is a creditor of the First Defendant."

The meaning of "other interested person"

16 The phrase "other interested person" is not defined in the Corporations Act. Section 445D is part of the package of reforms introduced into the Corporations Law by the Corporate Law Reform Act 1992, following recommendations by the Australian Law Reform Commission in its General Insolvency Inquiry (Report No 45, 1998, which I shall refer to as "the Harmer Committee's Report"). The draft Bill prepared by the Harmer Committee envisaged that standing to bring an application to terminate a deed of company arrangement would be conferred only on the administrator, a creditor of the company, or the Corporate Affairs Commission. This approximately corresponds with standing to bring an application for an order declaring the deed to be void (now s 445G) - although in the latter case it was proposed that a member should also have standing, and that proposal was implemented.

17 However, by the time the Harmer Committee's recommendations became law in the 1992 amendments, standing to make an application for termination of a deed of company arrangement had been extended as well to "any other interested person", without any indication in the explanatory memorandum to the Bill as to why the change was made. One infers that there was a legislative intention to allow a broader class of persons to apply for termination of a deed than could apply for a declaration that a deed is void.

18 The view that the words "other interested person" are words of wide scope is reinforced by comparing s 445D (2) with other provisions of Part 5.3A which confer standing to make applications of various kinds. Thus, s 447A is a broad provision which permits the Court to make such order as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. The breadth of the section was confirmed by the High Court's judgment in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. Standing to apply for such an order is conferred by s 447A (4) on the company, a creditor of the company, the administrator of the company under voluntary administration or a deed, the Commission, and "any other interested person". It is likely, given the breadth of the powers conferred by s 447A on the Court, and the remedial purpose of the section as recognised by the High Court, that the legislature intended to give standing to apply for such relief to a broad class of applicants.

19 Sections 445D (2) and 447A (4) may be contrasted with ss 447E (3) and 449D (3), as well as with s 445G (1). Standing to make applications under these latter sections, where the subject of the application is rather more specific than the subject of the former sections, is confined to creditors, members, officers (in the case of s 449D (3)) and the Commission. The comparison suggests that the words "other interested person", where they are added to the list, are inserted to broaden the class of potential applicants.

20 In my view, the words "other interested person" in s 445D (2) are intended to encompass applicants whose material rights or economic interests are or may be affected by the operation or effect of the deed of company arrangement which they seek to challenge, at least where the effect is substantial. A useful analogy may be made with ss 27 and 30 of the Administrative Appeals Tribunal Act 1975 (Cth), which permit a person whose "interests are affected" by a decision to seek review of that decision, and to become a party. The meaning of those words was explored in Re Control Investment Pty Ltd and Australian Broadcasting Tribunal (No 1) (1980) 3 ALD 74. After reviewing authorities on similarly worded provisions, Davies J said (at 79):

"In their context in ss 27 and 30, the words "interests are affected" denote interests which a person has other than as a member of the general public and other than as a person merely holding a belief that a particular type of conduct should be prevented or a particular law observed. The interest affected need not be a legal interest nor need the person seeking joinder establish legal ownership of the interest. … However, a person seeking joinder must be able to identify a relevant interest which is his. In other contexts, dicta in cases have used the adjectives "real", "genuine" and "direct" to describe the relationship required between the decision and the interest. Sections 27 (1) and 30 (1) do not make use of adjectives but they do require that the applicant demonstrates genuine affection of an interest which attaches to him. The nature of the interest required in a particular case will be influenced by the subject matter and context of the decision under review."

21 An applicant whose substantial economic interests are at stake would be a person whose "interests are affected" for the purposes of ss 27 and 30, according to Davies J's reasoning. Counsel for CMG submitted that I should not use this analogy because "administrative law is another universe of discourse". I disagree. The administrative law jurisprudence seeks to identify the occasions when a person complaining about an administrative decision has a sufficient practical interest to have the decision reviewed. That is broadly the same task as the legislature has assigned to the Court by using the words "other interested person" in s 445D (2). It is not necessary for me to hold that the words "interests are affected" in the Administrative Appeals Tribunal Act identify precisely the same class of applicants as the words "other interested person" in s 445D (2). It is enough to say that when material legal rights or pecuniary or other economic interests of the applicant are or may be substantially affected by the matter in issue, the applicant is an "other interested person", however much further those words may extend, just as the applicant would also be a person whose "interests are affected" for the purposes of the Administrative Appeals Tribunal Act.

Is Allatech an "other interested person"?

22 I have decided that Allatech is a person whose material rights or pecuniary or other economic interests are substantially affected by the deed of company arrangement in the present case. I have reached this conclusion on both of the grounds advanced by counsel for Allatech.

23 First, counsel for Allatech draws attention to the provisions of the deed of company arrangement which impose a moratorium on "Deed Creditors" to take proceedings of various kinds for recovery of debts (see clause 15), and the provisions which require "Deed Creditors” to accept the entitlements provided for them under the deed in full satisfaction and discharge of their debts and extinguish the debts of "Deed Creditors” once a distribution has been made (clauses 16 and 17). The words "Deed Creditor” are defined in the deed to mean "any person who is or claims to be owed a debt by the Company on [15 June 2000] …".

24 For the purposes of determination of the separate question under Part 31, CMG has conceded that Allatech has claimed to be a creditor on 15 June 2000 and that its claim was included in the claims of creditors referred to in the Report as to Affairs attached to Mr Hillig's Report. Allatech contends that it is consequently a Deed Creditor for the purposes of the deed of company arrangement, and accordingly that its rights are affected by the deed because its claim to payment will be subject to a moratorium and extinguishment if the deed stands.

25 CMG's response is that a person cannot become an "interested person" for the purposes of s 445D (2) merely by claiming to be creditor. Thus, a madman who makes a totally unsubstantiated and irrational claim to be a creditor surely cannot be an interested person for the purposes of s 445D (2), even if that claim brings him literally within the definition of "Deed Creditor”. CMG's submission is that where a claim to be a creditor is so misguided as to fall within the category of someone with no claim at all, there is no standing to seek termination of the deed; conversely, for a person who claims to be a creditor to be an interested person having standing, the claim must be more than a bare claim. Various formulations of the additional ingredient could be adopted, words such as "bona fide claim" or "prima facie claim" or "claim with the colour of right" coming to mind as possible formulations.

26 I agree with the thrust of CMG's submission on this point. It is not necessary for me to formulate the additional ingredient in order to resolve the present case, but it seems to me that there must be some additional ingredient beyond the bare claim to be a creditor before it can sensibly be said that the claimant is an interested person for the purposes of s 445D (2). The administrative law analogy suggests that this is so - in the passage from the Control Investment case quoted above, Davies J referred to the use in various cases of adjectives such as "real", "genuine" and "direct". The reason why I need not go further than to recognise that there is an additional ingredient of some sort is that in my view, whatever formulation of the additional ingredient is adopted, it is clearly satisfied here. In the present case Allatech has a claim to be a creditor which, whether it is ultimately found to be correct, relies on grounds that are genuinely arguable. I shall explain why I have reached this conclusion.

27 The building works contract for the Blue Hills project is a contract "without quantities and with staged practical completion", No JCC-F 1994 approved by The Royal Australian Institute of Architects, Master Builders Australia, Incorporated and The Building Owners and Managers Association of Australia Ltd. Allatech claims to have determined the contract, and to be entitled to be paid the sum ascertained under clause 12.05.04.

28 Clause 12.05 is headed "Consequences of Determination by Proprietor". Clause 12.05.04 states:

"Until completion of the Works pursuant to paragraph 12.05.01 the Proprietor shall not be bound by any provision of this Agreement or otherwise to make any further payment to the Builder but as soon as is reasonable thereafter, having regard to the rights of the Proprietor under paragraph 12.05.01 [which enables the Proprietor to employ another builder to complete the Works], the Architect shall ascertain the amount of costs properly incurred by the Proprietor pursuant to that paragraph and the amount of any loss and/or damage caused to the Proprietor by the determination and any other liability of the Builder to the Proprietor under this Agreement and shall certify all of the same and if such aforesaid amounts when added to the moneys paid to the Builder before the date of determination result in a total amount in excess of that which would have been otherwise payable under this Agreement the difference shall be a debt due and payable to the Proprietor by the Builder. If the said amounts when added to the said moneys result in a lesser total than that which the Proprietor would otherwise have been required to pay under this agreement then the difference shall be a debt due and payable by the Proprietor to the Builder."

29 It is plain from clause 12.05.04 that the Architect has an important role to play under the building works contract. That is confirmed by various other provisions. The Architect acts as an agent on behalf of the Proprietor (clause 5.01) and is authorised to issue instructions to the Builder with respect to some 16 matters listed in clause 5.02.01. The Architect is also authorised to act as the assessor, valuer or certifier in respect of another 16 matters specified in clause 5.02.02 (although for some reason clause 12.05.04 is not in the list). The words "The Architect" are defined in clause 1.02.03 as follows:

"The person, partnership or corporation named in Item B.3 of the Appendix appointed by the Proprietor as such for the purposes of this Agreement or any other person, partnership or corporation appointed by the Proprietor pursuant to the provisions of Clause 5.07 [which deals with replacement of the Architect] and including persons with authority to act on behalf of the Architect."

30 Item B.3 of the Appendix specifies three firms of architects, namely Robert Peck, Whitehall Property Consultants and Wilde and Woollard. In each case the words "as to" are written adjacent to the name, and various paragraphs of clause 5.02.01 and clause 5.02.02 are designated. The effect is to subdivide the tasks allocated to "the Architect" amongst the three designated architects. Since, however, clause 5.02.02 omits to refer to the issuing of a certificate under clause 12.05.04, the subdivision of tasks achieved by Item B.3 also omits to refer to clause 12.05.04.

31 Counsel for CMG submits that in these circumstances, it is manifest that any purported certificate issued by any of the three firms named in Item B.3 cannot be a valid certificate under clause 12.05.04. He refers to Keating on Building Contracts (6th ed by Sir Anthony May, 1995), p 119, as authority for the proposition that "if a particular person is named as the certifier, in the absence of a term indicating the contrary, that person and no other can give the certificate." The learned authors rely for that proposition on Ess v Truscott (1837) 2 M & W 385 where the parties agreed to a contract for the sale of goods at a valuation to be made by Crook, but the valuer was Atkinson, Crook's clerk. It was held that the defendant was not bound to take the goods at that valuation. For the purposes of this application I accept that if the certificate under clause 12.05.04 was issued by the wrong firm, it would not be a certificate for the purposes of that clause. But here the problem seems to be that the words "the Architect" in clause 12.05.04 are ambiguous, so that it cannot clearly be said that the certificate was issued by the wrong person.

32 Counsel for CMG also cites some observations of the Appeal Division of the Supreme Court of Victoria in Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27, at 61-62, which refer to the failure of some architects to exercise an independent judgment and to a tendency to exhibit "an unhealthy dependence of the architect upon his client". These observations may become relevant in the hearing of the Construction List proceeding, if appropriate evidence is adduced, but the evidence before me now does not demonstrate that the architect (whoever he may be) failed to discharge any duty of independence.

33 This is not the occasion for making any ruling on CMG's contentions. The only question I have to consider (as explained above) is whether Allatech's claim to be a creditor of CMG by virtue of a certificate issued under clause 12.05.04 has sufficient substance to it that it is not a mere claim. It suffices for present purposes to say that CMG's submission is not so obviously correct that the claim of Allatech to be a creditor is hopeless. Allatech has a plausible argument that the words "the Architect" in clause 12.05.04 are ambiguous and that the ambiguity should be resolved by evidence of the circumstances in which the contract was made. It may be that the admissible evidence as a whole will serve to identify the Architect for the purposes of clause 12.05.04 - I do not know because I have not been taken, for the purposes of this application, to the evidence. If the matter is properly investigated before the Court (the Construction List proceeding being the proper occasion for doing so), the Court may be reluctant to conclude that the words "the Architect" in clause 12.05.04 do not designate any of the three firms and therefore that there is no Architect for the purposes of that clause.

34 On 18 April 2000 Robert Peck wrote to CMG enclosing a Notice of Practical Completion in relation to the Blue Hills project. The letter also said:

"For your information a copy of the assessment of costs incurred (with reference to Clause 12.05.04 of the Contract), as prepared by Wilde and Woollard dated 10 April 2000 is also enclosed. An estimate for the cost of outstanding rectification work as prepared by Wilde and Woollard is also enclosed."

35 Enclosed with Robert Peck's letter is a letter to that firm from Wilde and Woollard dated 10 April 2000 which begins:

"In accordance with Clause 12.05.04 of the Contract, we have prepared an assessment of the costs incurred in the completion of the above project …".

Wilde and Woollard's letter goes on to set out the contract sum and variations, and to make deductions from that sum for costs incurred by Allatech in completing the project, payments made to CMG, the estimated cost of outstanding rectification works (set out in a schedule) and liquidated damages (calculated according to a table). The net result is said to be a debt owing by CMG to Allatech of $112,301.

36 CMG says that neither Robert Peck's letter nor Wilde and Woollard's letter, nor the two of them in combination, can be regarded as a certificate for the purposes of clause 12.05.04. Robert Peck does not, in its letter, purport to certify to anything. Wilde and Woollard's letter does not in terms claim to be a certificate, and its calculations are described as "an assessment of the costs incurred in the completion of the above project". The assessment includes an estimate of costs of outstanding rectification works, not expressly provided for in clause 12.05.04. The letter does not purport to certify that the costs said to be incurred by Allatech were properly incurred, and the calculation of loss or damage is described as "liquidated damages".

37 Once again, the only question for me to decide is whether Allatech's claim (namely that the letters of Robert Peck and Wilde and Woollard together are, or the letter of Wilde and Woollard considered separately is, a certificate for the purposes of clause 12.05.04) is so hopeless that it is no more than a bare claim to be a creditor. In my view it is clear that Allatech has more than a bare claim. Although Wilde and Woollard's letter is not expressed to be a certificate, the letter claims that the assessment of costs has been prepared in accordance with clause 12.05.04. Although the letter does not expressly certify that the costs which it lists were properly incurred by Allatech, it may be that such certification can be implied from the letter, perhaps with the aid of admissible extrinsic evidence. Although there is some doubt as to whether Wilde and Woollard was "the Architect" for the purposes of clause 12.05.04, its letter was arguably adopted by Robert Peck, and the Court considering these issues may reach the conclusion that the Architect for the purposes of clause 12.05.04 was either one of these two firms or both of them in combination.

38 Counsel for CMG did not take me to the civil works contract, although there is in evidence another letter from Wilde and Woollard dated 10 April 2000 purporting to have been issued in accordance with clause 44.6 of that contract. Since the question under the civil works contract was not argued before me, I shall not express a view on it. It may be that the issues arising under the civil works contract are quite different from the issues under the building works contract, because clause 44.6 of the civil works contract relates to a certificate by the Superintendent rather than the Architect. I need not express any view, since my conclusion with respect to the building works contract is sufficient for the purposes of the present application.

39 My conclusion is that the status of Allatech as a Deed Creditor for the purposes of the deed of the company arrangement made it an interested person for the purposes of s 445D (2) (c), since its claim to be a creditor was a claim of substance and not a bare claim. I should record that Allatech also makes a claim based on estoppel, which is unnecessary for me to consider.

40 Allatech's second ground for contending that it is an interested person for the purposes of s 445D (2) (c) is that it has a cross-claim in the Construction List proceeding, for the debts which it alleges to have arisen by the issue of certificates under the building works and civil works contract. Allatech says that the assertion on substantial grounds of a claim to debt in legal proceedings makes it an interested person for the purposes of s 445D (2) (c), regardless of the effect of the definition of "Deed Creditor" in the deed of company arrangement. This is because the deed operates to enable the directors of CMG to conduct and fund the litigation in which they are resisting Allatech's cross-claim.

41 In my opinion this contention is correct. For the reasons I have given, I regard Allatech's claim to debt as a claim of substance, although I am not in a position to say that it will succeed. Allatech therefore has a substantial economic interest in the termination of the deed, because the termination of the deed could well affect the successful prosecution of its claim for recovery of debts in the Construction List proceeding.

42 Counsel for CMG placed emphasis on Allatech's statement to the Court, recorded as a note to the order for determination of the separate question, that it would not "contend, for the purpose of determination of the separate question, that it is an other person by reason of the fact that it is a creditor of the First Defendant". Counsel referred to this as a "concession", and said that the concession by Allatech that it is not a creditor is the "seed of destruction" of its argument that it has standing as an interested person. This submission misconceives the nature of Allatech's statement. Allatech did not concede that it was not a creditor. It merely said that it would not contend that it is an "interested person" for the purposes of s 445D (2) because it is a creditor. Its statement left open the contentions in fact made by Allatech, that it is an interested person because it has a plausible claim to be a creditor which will be extinguished by the deed of company arrangement, and because the deed permits the directors of CMG to resist that claim in the Construction List proceeding.

43 Counsel for CMG also contended, as a matter of construction of s 445D (2), that a person who claims to be a creditor can have standing only if the claim is made out, so that s 445D (2) (a) applies, and if the claim to the status of creditor cannot be established, it is not open to the applicant to fall back on s 445D (2) (c). No authority was cited for this proposition, either directly or by analogy, and I can see no logical basis for it. A plausible claim to be a creditor may give the applicant standing as an interested person under s 445D (2) (c) if additional elements demonstrate that the applicant's economic interests are at stake. Here the additional elements are the operation of the deed of company arrangement to extinguish such a claim, and the fact that if the deed of company arrangement is valid it will provide a means for the directors of CMG to resist the claim.

44 Counsel for CMG also contended that it was not open, in view of the terms of the Statement of Claim, for Allatech to contend that it has standing as an interested person because its pecuniary interests are at stake. That might have been so if the pecuniary interest relied on by Allatech was an interest arising otherwise than out of the claim to be a creditor, the operation of the deed of company arrangement and the impact of the deed on the conduct of the Construction List proceeding. But the pecuniary interest asserted by Allatech is an interest arising directly out of these things. Therefore, the interest asserted by Allatech in the hearing of the Part 31 question is a interest properly arising out of its pleading.

45 Finally, counsel for CMG contended that if Allatech's contentions were correct, it would be a "Deed Creditor" for all purposes, and consequently it would be affected by the moratorium in clause 15.1 (a) of the deed, which says that no Deed Creditor will "take or concur in the taking of any step to wind up the company". I agree that this is so. Nothing flows from that point as far as the present application is concerned. It is unnecessary for me to decide, in the present application, whether Allatech can be restrained as a Deed Creditor from prosecuting the present proceeding, having regard to clause 15.1 (a) of the deed. However, lest this be taken as an invitation to CMG to make yet another application, I should say that on a preliminary view, I doubt whether the present proceeding is properly characterised as a step to wind up CMG for the purposes of clause 15.1 (a).

Conclusions

46 The hearing of the application for determination of the Part 31 question took place on 5 April 2002. At the end of the hearing, I had firmly reached the conclusion that Allatech has standing to bring the present proceeding under s 445D (2) (c), as an other interested person, regardless of whether it is or is not in fact a creditor of CMG. Since there were other interlocutory matters before me at that time, the resolution of which depended upon my answer to the separate question, I immediately made orders, on the basis that these reasons for judgment would be made available later. No objection was taken to my doing so.

47 My orders were:

"1. With respect to the determination of the separate question under Part 31, the Court determines that the plaintiff is an "other interested person" within the meaning ascribed to the term by s 445D (2) (c) of the Corporations Act.

2. The costs of the application under Part 31 are reserved."

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LAST UPDATED: 13/05/2002