Rambaldi v Spalla [2005] VSC 162

What the court decided

Mr Rambaldi was the liquidator of Irlmond Pty Ltd in a creditors' voluntary winding up [1], [3]. His originating process sought an order authorising Irlmond's officers to conduct a Federal Court proceeding and two related appeals in it, one of them Irlmond's [2], [5]. It relied, as Hansen J described it, on section 511(1)(b), which attracts the power in section 471A(1A)(d) [3].

In the Federal Court, Irlmond, Mr Spalla and one other person were applicants against Irlmond's receivers and others [5]. At a mediation on 29 April 2005 the liquidator agreed conditional terms of settlement [1]. That afternoon, before the settlement, a funder that had agreed to indemnify the liquidator against adverse costs gave notice of withdrawal [9]–[10]. Under the settlement Irlmond would discontinue its appeal in the proceeding and release its claims, with mutual releases from adverse costs orders [8]. Nothing would take effect unless the liquidator's firm consented by 5.00pm on Friday 6 May, and claims of the other applicants were left aside [8]. Filed late on the eve of that deadline, the originating process in effect had to be decided on 6 May itself [1], [8].

Counsel for the liquidator said guidance was sought; he contended for no particular disposition but made clear that his client preferred no order [4]. The liquidator had told Mr Spalla by letter of 11 February 2005 that the funder would withdraw and that, unless satisfactory funding was in place before then, the liquidator would be forced to negotiate a settlement [13]. Hansen J regarded that letter as a warning and foreshadowing of what had happened [15].

His Honour would not advise the firm and much hesitated to advise the liquidator on what seemed to him a not unusual decision, the liquidator's own, in litigation [18]. Mr Spalla sought authority to conduct Irlmond's litigation himself, and his Honour said, as discussed with counsel, that he could make such an order under section 511(1)(b) if, in his view, it was otherwise appropriate [18].

Hansen J had great sympathy for Mr Spalla but said the overall interest of Irlmond, its creditors and members was his concern [19]. He was of the view that he lacked sufficient information to assess that interest; on the Federal Court proceeding's chances of success or benefit to Irlmond he could form no view [19]. It seemed to Hansen J that in those circumstances he was not in a position to make the order sought, however much he might otherwise have been disposed to do so [20]. He had been given no opinion by counsel or a solicitor on the merits of the claims pleaded in the proceeding, or of those struck out and under appeal, nor any opposing pleadings, if there were any [7]. Nor had he a proposal to leave Irlmond no worse off on the costs orders to be released, or any assurance beyond Mr Spalla's own about its ongoing costs [20]. His Honour also noted that the liquidator sought no direction about the firm's consent, and neither counsel for the liquidator nor Mr Spalla had addressed how authorising Mr Spalla would affect its decision, "indeed the ability", to consent [16]. Hansen J did not feel able to direct the liquidator, and made no order on the originating process [22].

Why it matters

In my view, the ruling shows what was missing here: a lawyer's view of the merits, an assurance on ongoing costs beyond that stated by Mr Spalla and protection for Irlmond on the released orders. It does not say what would have been enough.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.