Bauer, E.M. v Stapleton Partners

[1991] FCA 829

Re: ERNA MARIA BAUER
And: STAPLETON PARTNERS
Nos. N G3096 and 3097 of 1991
FED No. 829

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

HEARING

SYDNEY

#DATE 17:12:1991

No appearance for the Applicant.

Counsel for the Respondent: D. Grieve QC, P. Linegar

Solicitors for the Respondent: Walsh James

ORDER

The application be dismissed.

The applicant pay the costs of the respondent as between solicitor and client.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

On 15 August this year, Dr Erna Maria Bauer filed in this Court two applications; one in matter 3096 and the other in matter 3097, each of 1991. In matter 3096 Dr Bauer seeks the following two orders:

"a. an order under section 260(1) section 448(9) section 477(6) of the Corporations Law for an appointment of an "A" list liquidator to act on behalf of the creditor, Dr Erna Maria Bauer, as a shareholder of Baufam Pty Limited A.C.N.000 820 342 50 per cent with one preferential A class share and shareholder of E.M. Bauer and Associates Pty Limited A.C.N. 002143660 shareholder and member with 95 per cent of shares. b. Dr E.M. Bauer has since 1977 to 1982 through her business account and from 1982 to 1986 loaned moneys through E.M. Bauer and Associates A.C.N. 002 143 660 to Baufam Pty Limited A.C.N. 000 820 342 in an approximate amount of $150,000 - $200,000. Dr E.M. Bauer, is a creditor to Baufmam (sic) Pty Limited A.C.N. 000 820 342 being a shareholder and member of both companies."

1. In matter 3097 Dr Bauer seeks two orders in these terms:
   

"(1) an order restraining the respondent from acting as a liquidator for Baufam Pty Limited A.C.N. 0OO 820 342 8 Waterloo Street, Narrabeen NSW 210l under sections 540, 536(1)(3), 132(1)(7), 133(1)(2) and 134 of Corporation Law of Australia.

And the applicant claims by way of interlocutory relief:

(2) an order restraining the respondent from causing any financial transactions or holding moneys from the auction of property in 8 Waterloo Street, Narrabeen, NSW 2101 under section 134 of the Corporation Law of Australia."

1. In each matter the respondent is Stapleton Partners, chartered accountants, of Sydney who have appeared and oppose the application.

2. On 6 September 1991 the respondent filed a notice of motion in each matter seeking an order that the application be dismissed pursuant to Order 20, Rule 2, of this Court's rules and an order for costs. The two matters have been treated together by this Court in directions hearings on various occasions. The applications first came before a Registrar of the Court on a number of occasions. On 13 September this year the matters came before another Judge of the Court.

3. On 22 November the matters came before me for the first time. On that occasion Mr Bavin appeared for the respondents and Dr Bauer represented herself. The orders which the Court made on 22 November 1991 were that, in each matter, the notice of motion of the respondent of 6 September 1991 be adjourned for hearing until today at 10.15 a.m., that Dr Bauer was to file and serve all affidavits upon which she may seek to rely in opposition to the respondent's motion by 6 December 1991 and that the respondent was to file and serve any affidavits in reply by 12.00 pm yesterday, 16 December. The matters were also adjourned generally until today. Dr Bauer, in fact, filed an affidavit sworn on 6 December 1991.

4. The matter was called on this morning at the commencement of the Court's business. Counsel appeared for the respondent, but there was no appearance by or on behalf of Dr Bauer. Her name was called in the customary fashion outside the Court as soon as the proceeding commenced and, indeed, I had it recalled a few minutes ago just before I proceeded to give judgment. On neither occasion was there any appearance by or on behalf of Dr Bauer.

5. I, therefore, have proceeded this morning to deal with the two motions of the respondents for orders under order 20, rule 2. Counsel for the respondent has taken me to all the affidavits and annexures or exhibits thereto which have been filed in each matter and I have made an order that the two matters be heard together with the evidence in one to be treated as evidence in the other. The two matters are obviously closely related to each other. Whether heard together or separately it would not make the slightest difference to the result.

6. It is necessary to say something about the relevant facts. Dr Bauer and her former husband were involved in proceedings in the Family Court of Australia and their dispute came before that court on more than one occasion. Relevantly, for present purposes, the Family Court made an order on 6 March 1990 that both Dr Bauer and her husband do all acts and things necessary (a) to place the company Baufam Pty Limited ("Baufam") into voluntary liquidation and (b) to direct that the liquidator distribute the net assets of Baufam by way of realisation of all assets whether by cash or otherwise equally between Dr Bauer and her husband. Certain other orders were made consequential to that. It would appear that the two parties to the family law proceeding did not comply with that order and further orders were made on 20 November 1990 in furtherance of the Family Court's intent that Baufam be wound up voluntarily. However, nothing appears to have come of those orders and accordingly on 17 December 1990 the Family Court made certain orders by consent. The critical order was order 1, which I have seen in the form of a formal order of the Family Court and in the form of short minutes which appear to have been signed by Dr Bauer and by the solicitor for her husband. Order 1 is that, by consent, the orders of 6 March and 20 November 1990 be varied so as to provide that the company Baufam be wound up under the Companies (New South Wales) Code ("the Code") and that Geoffrey McNiel Ellison from the firm of Stapleton Denning be appointed liquidator of the company.

7. Baufam does not appear to have been technically made a party to the family law proceeding. Whether it should or should not have been made a party to the proceeding is not a matter which I think it is appropriate for this Court to say anything about. What is clear, however, is that, whether a party or not, the Family Court purported to wind it up under the Code, being the law relevantly in force at the time and to have appointed Mr Ellison as liquidator and to have done all this by consent of Dr Bauer and her husband. Indeed, the liquidator has proceeded to administer the assets of Baufam in a winding up to the point where assets have now been realised and show a surplus of assets over liabilities and are available for distribution to the members of the company, Dr Bauer and her husband.

8. The principle asset of Baufam was a property at 8 Waterloo Street, Narrabeen, New South Wales in which it appears Dr Bauer conducted her medical practise. That property was sold at auction on 18 July this year realising a gross sale price of $328,000 and the net proceeds of sale are presently being held by the liquidator. The sale followed after Dr Bauer's husband offered to buy it for $250,000 and Dr Bauer herself had responded that if the offer was increased to $300,000 she would give it consideration. In fact, as I have mentioned, it realised some $328,000, well above its reserve price. In the result the liquidator has completed the bulk of his duties and is anxious to formally complete the winding up by distributing the surplus assets to those entitled to them.

9. Dr Bauer was made bankrupt by order of this Court on 11 March 1991. The sequestration order was made on the application of creditors, a firm of solicitors, and it would appear that the debt upon which the petition was based was a debt due to the solicitors by way of costs for acting for Dr Bauer in the Family Law Court proceedings.

10. Mr Studman has appeared this morning as the delegate of the Official Trustee, who is the trustee of the bankrupt estate of Dr Bauer, and has informed me of matters most of which are in any event in evidence and they lead to the conclusion that the administration of her bankrupt estate has now been virtually completed. Indeed, two distributions have been made to creditors and there is a surplus of assets over liabilities to which Dr Bauer is entitled. That surplus is arrived at quite independently of the surplus that exists in the winding up of Baufam. It would appear, from what I have been told by Mr Studman, that there is no technical or other barrier in the path of Dr Bauer applying for an earlier discharge than would flow by the effluxion of time under the Bankruptcy Act or, possibly, even for an order of annulment. Whether they would succeed is of course not a matter on which I make any comment.

11. The application of Dr Bauer for the appointment of an "A" list liquidator and the other orders to which I have already referred in matter 3096 and the application for injunction in matter 3097 are obviously inter related. I have read the various affidavits that she has filed. It is not easy to ascertain exactly what it is that Dr Bauer is seeking in these two matters. Doing the best I can, it seems that in matter 3096 she is dissatisfied with the performance of the liquidator of Baufam and seeks to have an "A" list liquidator, presumably an official liquidator, appointed in place of Mr Ellison. She also seeks some form of declaration of her status as a creditor of Baufam and possibly also as a shareholder. In matter 3097 she seeks orders that, as I understand them, seek to restrain Mr Ellison from acting as liquidator of Baufam and an order restraining him from holding any of the proceeds of the auction of the property at Narrabeen which he has realised. It would appear that, at the date of the filing of the application by Dr Bauer on 15 August 1991 in matter 3097, the auction sale had already been held and the property sold, so that her complaint does not appear to go to that; but it does go to the retention of the moneys in the hands of the liquidator of Baufam.

12. The evidence that Dr Bauer has filed in support of each matter need not be referred to by me at any length at all. However, I have read it. She makes a number of assertions about what she says is the conduct of her husband and Mr Ellison and others with respect to electricity being disconnected from the Narrabeen property and the impact that that and other matters have had on her ability to conduct her surgery at those premises and the consequence of what she asserts to be loss of income, in part, of her practice. I need not refer to all the other matters of fact to which she makes reference in her evidence.

13. The two motions of the respondent must succeed for a number of reasons. First, each of the two substantive applications of Dr Bauer in the two matters, 3096 and 3097, assume that the Federal Court has jurisdiction in relation to the winding up of Baufam. That assumption is fundamental to each application. The winding up of Baufam was pursuant to the order of the Family Court made on the 17 December 1990 and the relevant corporations legislation then in force was the Code. The Corporations Law, under the Commonwealth Co-operative Scheme of Corporations Legislation (the "Scheme"), did not come into force until 1 January 1991. Section 601 of the Corporations Law makes it clear that the provisions of that law with respect to the winding up of a company do not apply to any company the winding up of which commenced before 1 January 1991 and that such companies are to be wound up under the earlier law relating to corporations then in force, which is, in this case, the Code. The orders sought in each matter rely on sections of the Corporations Law as mentioned and not the Code. It is therefore plain that this Court does not jurisdiction to deal with either of the substantive applications and therefore they must go.

14. Even if Dr Bauer had brought her applications to this Court under the Code a serious question would arise as to the Court's jurisdiction to hear them. French J. dealt with this question in State of Western Australia v Vetter Trittler Pty Limited (In Liquidation) (Receiver and Manager Appointed), (1991) ATPR (Digest) 1146-075. Acting on the principle of comity (see my judgment in Re Athanophobous, 18 May 1982; Zibillari v R (1980) 31 ALR 693 at 695, 703-4) I would have followed my brother French's judgment and concluded that this Court did not have jurisdiction to hear the matter. Further, I would have concluded that even if the Court had jurisdiction I would not have exercised it because orders of the kind sought by Dr Bauer should be made by the Court which made the winding-up order.

15. However, having had regard to all the evidence in the matter, even if this Court did have jurisdiction to entertain the substantive applications, I am satisfied that the complaints made by Dr Bauer in each of our applications do not disclose any reasonable cause of action. I am satisfied that the two applications are, within the meaning of the cases, both frivolous and vexatious, and that therefore the applications must be dismissed.

16. I should say that, as to the circumstances in which the courts will appoint liquidators in lieu of others, the law is well established and the relevant test is best summed up in this question: Does the substantial and real interest of the winding up require or justify the removal of a liquidator and the appointment of another liquidator in his place? See re Adam Eyton Limited ex parte Charlesworth (1887) 36 ChD 299; re George A. Bond and Company Limited (1932) 32 SR (NSW) 301 at 310 and re Goonal Pty Ltd (In liquidation) (1977) 3 ACLR 408, a decision of King J. of the Supreme Court of Victoria.

17. Applying that test to the facts of this case, it is obvious that there is no case whatever for the orders that are sought in relation to the liquidator of Baufam. Accordingly, in each matter 3096 and 3097, the Court orders that the application be dismissed.

18. A question arises as to the appropriate order for costs to be made in both matters. The two notices of motion of the respondents seek an order in these terms: "That the applicant pay the respondent's costs of the proceedings including the costs of the motion". Counsel for the respondent seek an order that Dr Bauer should pay their costs as between solicitor and client and not merely as between party and party.

19. It is well established that costs as between solicitor and client may be awarded in appropriate cases where there is "some special or unusual feature in the case to justify the court's exercising it's discretion in that way". See Preston v Preston (1982) 1 All ER 41 at 58; Australian Transport Insurance Pty Limited v Graeme Phillips Road Transport Insurance Pty Limited (1987) 71 ALR 287 per Woodward J. at 288; Christie v Christie (1873) LR 8 Ch Ap 499 and Australian Guarantee Corporation Limited v De Jager (1984) VR 483 at 502. The class of cases in which costs may be ordered on the basis of solicitor and client is, of course, essentially a matter for the discretion of the court awarding costs. As these two applications show no possible prospect of success either as to jurisdiction or on the facts, and as they assert matters of fact which are highly critical of the conduct of the respondents but have not been shown to have any substance at all, in my opinion, the appropriate order for costs is that the applicant, Dr Bauer, pay the costs of the respondent of each of the proceedings, 3096 and 3097 of 1991, as between solicitor and client and I make that order.