Australian Consolidated Investments Ltd v England, R.A.F
[1995] FCA 52
•17 FEBRUARY 1995
CATCHWORDS
CORPORATIONS - appeal against rejection of proof of debt - application to transfer proceeding to Supreme Court of South Australia
Corporations (South Australia) Act 1990, s44
Corporations Act 1989, ss53, 53B
Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1
Sheahan v Schaffer Corporation Pty Ltd (1993) 11 ACLC 136
Re Terranora Leisuretime Sales Ltd (1991) 5 ACSR 382
No. NG 3537 of 1994
AUSTRALIAN CONSOLIDATED INVESTMENTS LIMITED & anor v
RICHARD ANTHONY FOUNTAYNE ENGLAND
MOORE J
SYDNEY
17 FEBRUARY 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3537 of 1994
)
GENERAL DIVISION )
BETWEEN: AUSTRALIAN CONSOLIDATED
INVESTMENTS LIMITED
First Applicant
MANCHAR HOLDINGS PTY LTD
Second Applicant
AND: RICHARD ANTHONY FOUNTAYNE ENGLAND
Respondent
JUDGE: Moore J
PLACE: Sydney
DATE: 17 February 1995
ORDER OF THE COURT
THE COURT ORDERS THAT:
The application under s1321 of the Corporations Law be transferred to the Supreme Court of South Australia.
Costs be reserved.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3537 of 1994
)
GENERAL DIVISION )
BETWEEN: AUSTRALIAN CONSOLIDATED
INVESTMENTS LIMITED
First Applicant
MANCHAR HOLDINGS PTY LTD
Second Applicant
AND: RICHARD ANTHONY FOUNTAYNE ENGLAND
Respondent
JUDGE: Moore J
PLACE: Sydney
DATE: 17 February 1995
REASONS FOR JUDGMENT
This is an application ("the interlocutory application") by Richard England ("the liquidator") seeking to have certain proceedings transferred to the Supreme Court of South Australia ("the State Court"). The applicant is the liquidator of Southern Equities Corporation Limited ("SECL").
Two companies, Australian Consolidated Investments Ltd ("ACIL") and Manchar Holdings Pty Ltd ("Manchar") ("the disputing companies") lodged proofs of debt in the liquidation of SECL. Manchar is a subsidiary of ACIL. The liquidator rejected ACIL's proof of debt in its entirety and Manchar's in part. On 14 October 1994 an application was made by the disputing companies under s1321 of the Corporations Law ("the principal application") appealing against the liquidator's decision to reject the proofs of debt. The principal application was lodged in the New South Wales District Registry of the Federal Court of Australia and it is that application that the liquidator seeks to have transferred to the State Court. The disputing companies oppose the transfer.
The background leading to the lodgement of the proofs of debt is relevant to this interlocutory application and I repeat in a summary way what appeared to be an uncontentious account of it given by counsel for the disputing companies in these proceedings. SECL was formerly Bond Corporation Holdings Ltd and ACIL was formerly Bell Resources Ltd. SECL entered a scheme of arrangement in August 1991 which contained a provision that the disputing companies would provide SECL with working capital but that in the event that the scheme was terminated, the funds provided would be repaid in full prior to any distribution to creditors. In May 1991 SECL and the disputing companies, amongst others, had executed a deed which established the arrangement for the provision of working capital referred to in the scheme in contemplation of the scheme.
In August 1992 a further deed was entered into between SECL and the disputing companies amongst others, in which ACIL undertook to pay costs associated with litigation in the Supreme Court of Western Australia which was ultimately settled. That deed required that security be given for SECL debts to ACIL. The settlement of the Western Australian litigation gave rise to a deed of direction and release executed in December 1993 pursuant to which ACIL was to be paid a sum and upon payment, the disputing companies would "release and discharge each ACIL Security to which they are respectively beneficially entitled". At issue between the liquidator and the disputing companies in the principal application is whether this release and discharge discharged the debt between SECL and the disputing companies that arose from the provision of working capital to SECL and the funding of the litigation in the Supreme Court of Western Australia though other related and consequential issues may also arise.
The principal application has reached a point where particulars have been sought from the liquidator and provided. However a stage has not been reached where the issues are clearly defined and predictions can confidently be made as to who might be called to give evidence. I will return to this matter shortly.
The interlocutory application was originally framed by reference to s44 of the Corporations (South Australia) Act 1990. At the hearing, senior counsel for the liquidator identified s53 of the Corporations Act 1989 (Cth) as the relevant source of power to make the transfer order. Section 53 concerns civil proceedings under the Corporations Law of the Australian Capital Territory which has no apparent relevance to the liquidation of SECL. However no issue was raised about the jurisdiction of the Federal Court to make an order transferring the proceedings and the parties were content to proceed on the basis that s53 of the Corporations Act 1989 (Cth) was the source of the power to make the order. I will do likewise as the provisions in the various Corporations Acts are in relevantly the same terms. The liquidator has formally reserved an argument concerning the jurisdiction of the Federal Court to deal with the principal application though senior counsel for the liquidator accepted that I was, on that issue, bound by the decision of the Full Court in Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1.
Section 53 provides:
"(1)This section applies to a proceeding with respect to a civil matter arising under the Corporations Law of the Capital Territory in a court having jurisdiction under section 51.
Where it appears to the court that, having regard to the interests of justice, it is more appropriate for the proceeding, or an application in the proceeding, to be determined by another court having jurisdiction in the matters for determination in the proceeding or application, the first-mentioned court may transfer the proceeding or application to that other court."
It can be seen that s53(2) invests the Court with a discretionary power to be exercised "having regard to the interests of justice". It requires the Court to be affirmatively satisfied that it is more appropriate for the principal application to be determined by, relevantly, the State Court. The exercise of the discretion under s53 is subject to s53B which provides:
"In deciding whether to transfer under section 53 or 53A a proceeding or application, a court must have regard to:
(a)the principal place of business of any body corporate concerned in the proceeding or application; and
(b)the place or places where the events that are the subject of the proceeding or application took place."
I consider first the matters identified in s53B. It is common ground that the relevant bodies corporate for the purposes of s53B(a) are SECL and the disputing companies which have as their principal place of business Adelaide and Sydney respectively. Section 53B(b) calls for a consideration of "the events that are the subject of the proceedings" and plainly would not, for present purposes, only raise for consideration the place at which the proofs of debt were rejected, namely Adelaide. The relevant events include their rejection but also include the circumstances in which the deed of direction and release was conceived and executed. That appears to have been in Perth and Sydney.
The liquidator identified a number of factors that support the making of the order transferring the proceedings. I will consider those having regard to the submissions made by both the liquidator and the disputing companies in conjunction with factors identified by the disputing companies.
The first was that the order winding up SECL was made by the State Court. The liquidator submitted that the supervision of a winding up should be in the hands of one court unless there are compelling reasons to the contrary. In my opinion, this overstates the significance of the position of the court that has made the order. There will be many situations where it is plainly desirable for the court which has made the order, to deal with subsequent and related proceedings and the interests of justice will be served by permitting this to occur. Practical matters that would support such a conclusion were discussed by Lockhart J in Acton, supra, at 13.2 and 15.7. However the starting point is not an assumption that the court making the order should deal with subsequent proceedings. To proceed on that basis is to overlook the primacy given by the legislation to the interests of justice. In the present case a judge of the State Court has dealt with the winding up and related proceedings and is likely to be familiar with the matter generally. This is a factor indicating that the interests of justice would be best served by the primary application being dealt with by that Court as the judge who may well come to hear the matter is likely to more readily comprehend the factual and legal matrix by reference to which it will have to be decided. This may well result in a saving of time and costs. However given what I have been told about the issues that are likely to arise in the principal application, that saving should not be overstated as any judge would be likely to relatively readily comprehend the material necessary to determine it. It is nonetheless a factor favouring transfer. The disputing companies raise the possibility that the judge who might hear the principal application may have earlier expressed a view in other proceedings about issues that will fall to be decided in the principal application and, as a consequence, may be precluded from hearing it. Save possibly in the clearest of cases of apprehended bias, which this is plainly not, I do not see this as a matter that should influence whether a proceeding should be transferred. Even in such a case that consideration is, at best, likely only to neutralise a submission based on the convenience of having a judge familiar with the matter being available to determine the proceeding. I should not, by these remarks, be taken to be deciding that it is appropriate for the Court being asked to transfer a matter to express a view about whether a judge of the court to which it is proposed to be transferred can hear it.
The position of the liquidator was raised in support of an order transferring the proceedings. He is located in Adelaide. In litigation of the character of the principal application, it is reasonable to expect that the liquidator would be present during the hearing. Questions of importance might arise during the hearing that would require those appearing for the liquidator to obtain detailed instructions and to proffer advice relevant to the way the proceedings were being conducted and while telephone and facsimile provide means of doing so, they are still, in my opinion, not completely satisfactory for that purpose. The same might be said of the need for senior officers of the disputing companies to attend the hearing with authority to instruct. That was not a matter expressly raised by the disputing companies in these proceedings though it arose by implication when their principal place of business was identified as Sydney and it also arose in the context of the witnesses that might be called.
The liquidator submitted that the location of witnesses is of significance only if they come from the same state. Reference was made to Sheahan v Schaffer Corporation Pty Ltd (1993) 11 ACLC 136. Such a situation would clearly favour the proceeding being heard in the state in which the witnesses were located: see Re Terranora Leisuretime Sales Ltd (1991) 5 ACSR 382. However, even if potential witnesses might come from several states, a preponderance of them might come from one which would again suggest that advantages concerning costs and convenience would be gained by the proceedings being heard in that state. In the present proceedings it is difficult to say with any measure of certainty where potential witnesses might come from, as the issues have not yet fully crystallised. However there is the distinct possibility that at least six people would give evidence. One, Mr Hoffman, lives in Adelaide. Another, Mr Trenear, lives in Perth though has relatives in Adelaide that could accommodate him at minimal expense. Other, Messrs Conway, Somervaille and Lawler, live in Sydney. Another, Mr Whitehead, presently lives in Vietnam. There is thus, for this reason, a probable advantage in a hearing in Sydney rather than Adelaide though that depends upon all of these potential witnesses having to be called. Neither party raised the prospect of evidence being taken by video link which is now a feature of litigation in, at least, the Federal Court.
The next matter raised by the liquidator is the desirability of avoiding unnecessary costs such as those associated with having to move documents from Adelaide to Sydney and the related issue of the potentially disruptive effect on the administration of the winding up by having to move documents in that way. Evidence was led by the liquidator to show the volume of documents that might be required to be moved if the matter was heard in Sydney though the disputing companies endeavoured to establish that the documents likely to be relevant to the principal proceedings were limited in number. Also raised was the prospect of the liquidator having ready access to documents held in Adelaide by the Australian Securities Commission which arose from an investigation into the affairs of SECL. This is again a factual matter that is difficult to resolve conclusively at this time given that the issues have not yet fully crystallised. Nonetheless I can proceed on the basis that some documents are likely to be required to be moved, but they would be of a manageable quantity. However access to other documents located in Adelaide may be necessary during the hearing of the principal application.
The liquidator raised the question of legal representation. He has retained solicitors in Adelaide, Finlaysons, that do not have an office in Sydney and though part of the Allens Arthur Robinson Group, the Sydney firm that is part of the group, Allen Allen and Hemsley, have acted for Bond Corporation Holdings Ltd and would be precluded from acting in this matter. However the position of the disputing companies is little different, in that they have retained the firm of solicitors, Freehill Hollingdale and Page, which do not have offices in Adelaide. That firm has acted for the disputing companies since 1989. New solicitors would have to be instructed to formally appear on the record in proceedings in the State Court.
There are proceedings concerning the liquidation of SECL presently on foot in the State Court involving the examination of Mr Conway, the Managing Director of ACIL under an order obtained from that court which also required the disputing companies to produce documents relating to the registration of the deed of direction and release. However an application has been made that the relevant order be set aside. That application has been dismissed though the decision dismissing it will be the subject of an appeal.
The competing considerations as to how the interests of justice might best be served are comparatively evenly balanced. However the balance, in my opinion, favours slightly the principal application being heard by the State Court principally for reasons arising from the likely familiarity of that Court with the winding up. I am satisfied that, having regard to the interests of justice, it is more appropriate for the proceeding to be determined by the State Court. Accordingly I order that the application under s1321 of the Corporations Law be transferred to the Supreme Court of South Australia. The parties have leave to file written submissions on the question of costs within 7 days.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Decision herein of his Honour Justice Moore.
Associate:
Date:17 February 1995
Counsel for the Applicant: Mr A. Bell
Solicitor for the Applicant: Freehill Hollingdale &
Page
Counsel for the Respondent: Mr W.J.N. Wells QC
Solicitor for the Respondent: Finlaysons
Date of hearing: 10 February 1995
Date of judgment: 17 February 1995
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