Clifton v SMA Solar Technology A.G. (Joint Stock Company) (Germany)
[2016] FCA 464
•29 April 2016
FEDERAL COURT OF AUSTRALIA
Clifton v SMA Solar Technology A.G. (Joint Stock Company) (Germany)
[2016] FCA 464
File numbers: SAD 276 of 2014
SAD 261 of 2014Judge: BESANKO J Date of judgment: 29 April 2016 Catchwords: PRACTICE AND PROCEDURE – application for the hearing of a separate question pursuant to rule 30.01 of the Federal Court Rules 2011 (Cth) – where plaintiffs are liquidators who have brought two proceedings claiming unfair preferences within the meaning of s 588FA(1) of Corporations Act 2001 (Cth) – solvency of company in issue in both proceedings – where benefits in a separate question with respect to solvency issue and joint hearing and determination of solvency issue. Legislation: Corporations Act 2001 (Cth) ss 439A, 588FA, 588FC, 588FE, 588FG
Federal Court Rules 2011 (Cth) r 30.01
Date of hearing: 1 March 2016 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 13 In SAD 276 of 2014: Counsel for the Plaintiffs : Mr S Evans Solicitor for the Plaintiffs: O’Loughlins Lawyers Counsel for the Defendant: Mr R Foreman Solicitor for the Defendant: Corrs Chambers Westgarth In SAD 261 of 2014: Counsel for the Plaintiffs: Mr B Doyle Solicitor for the Plaintiffs : O’Loughlins Lawyers Counsel for the Defendant: Mr R Cameron Solicitor for the Defendant: Barrett Walker Lawyers ORDERS
SAD 276 of 2014 BETWEEN: TIMOTHY JAMES CLIFTON AND MARK CHRISTOPHER HALL IN THEIR CAPACITY AS LIQUIDATORS OF SOLAR SHOP AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 092 562 877
Plaintiffs
AND: SMA SOLAR TECHNOLOGY A.G., (JOINT STOCK COMPANY) (GERMANY) REGISTRATION NUMBER HRB 3972
Defendant
JUDGE:
BESANKO J
DATE OF ORDER:
29 APRIL 2016
THE COURT ORDERS THAT:
1. The directions hearing be adjourned to 17 May 2016 at 9.15 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
SAD 261 of 2014 BETWEEN: TIMOTHY JAMES CLIFTON AND MARK CHRISTOPHER HALL IN THEIR CAPACITY AS LIQUIDATORS OF SOLAR SHOP AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 092 562 877
Plaintiffs
AND: KERRYJ INVESTMENT PTY LTD TRADING AS CLENERGY ACN 108 633 227
Defendant
JUDGE:
BESANKO J
DATE OF ORDER:
29 APRIL 2016
THE COURT ORDERS THAT:
1. The directions hearing be adjourned to 17 May 2016 at 9.15 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BESANKO J:
There are two proceedings before the Court.
In SAD 276 of 2014 the plaintiffs are Timothy James Clifton and Mark Christopher Hall, and they are joint and several liquidators of Solar Shop Australia Pty Ltd (in liquidation) ACN 092 562 877 (“the liquidators”). The plaintiffs were appointed as joint and several administrators of Solar Shop Australia Pty Ltd (in liquidation) (“the company”) on 21 October 2011, and as joint and several liquidators by resolution of the creditors of the company at a meeting convened pursuant to s 439A of the Corporations Act 2001 (Cth) (“the Act”) on 25 November 2011. SMA Solar Technology A.G., (Joint Stock Company) (Germany) Registration number HRB 3972 (“SMA Solar Technology”) is the defendant and it sold solar technology systems to the company and was an unsecured creditor of the company. The relation-back day for the purposes of the company is said to be 21 October 2011, and the relation-back period of six months is said to have commenced on 22 April 2011. SMA Solar Technology received payments from the company in relation to the unsecured debt owed by the company to SMA Solar Technology. There were a series of payments with the first payment made on 17 May 2011, and the last payment made on 19 August 2011. The plaintiffs claim that each of the payments was an unfair preference within the meaning of s 588FA(1) of the Act. They claim that at the time each of the payments was made, the company was insolvent and unable to pay its debts as and when they fell due for payment. The plaintiffs claim that each of the payments was an insolvent transaction within s 588FC of the Act and a voidable transaction pursuant to s 588FE of the Act. The plaintiffs claim an order that SMA Solar Technology pay them the sum in Australian dollars equal to $2,455,850.21 euros.
SMA Solar Technology does not admit that at the time each of the payments was made, the company was insolvent and unable to pay its debts as and when they fell due for payment. I refer to that issue as the “solvency issue”. In addition, SMA Solar Technology claims that it has a defence under s 588FG(2) of the Act. I refer to that issue as the “s 588FG(2) defence”.
The parties to the proceeding have exchanged experts’ reports with respect to the solvency issue. The liquidators have obtained three reports from Mr Brian Morris of Edwards Marshall, and SMA Solar Technology has obtained a report of Mr David Lombe of Deloitte Touche Tohmatsu.
In SAD 261 of 2014, the claims are broadly similar. The plaintiffs bring the proceeding and the defendant is KerryJ Investment Pty Ltd trading as Clenergy ACN 108 633 227 (“KerryJ Investment”) which sold goods to the company. Between 1 August 2011 and 21 October 2011, the company made two payments to KerryJ Investment totalling $417,075. The plaintiffs allege that the payments were an unfair preference within s 588FA(1) of the Act. The plaintiffs allege that when each of the payments was made, the company was insolvent and unable to pay its debts as and when they fell due. KerryJ Investment denies this allegation. The plaintiffs claim that each of the payments was an insolvent transaction within the meaning of s 588FC of the Act, and a voidable transaction within the meaning of s 588FE(2) of the Act. The plaintiffs claim the sum of $417,075.26 from KerryJ Investment. In addition to its denial of the insolvency of the company at the time the payments were made, KerryJ Investment also relies on the s 588FG(2) defence.
The plaintiffs in this proceeding rely on the expert reports of Mr Morris, and KerryJ Investment relies on an expert report of Mr David Williams, Director of Forensics, SV Partners Forensics (Qld) Pty Ltd.
SMA Solar Technology and KerryJ Investment seek an order in their respective proceedings that the question of the solvency of the company be dealt with as a separate question pursuant to r 30.01 of the Federal Court Rules 2011 (Cth). The separate questions would be heard together and the evidence received in relation to the separate question in each proceeding would be evidence in the separate question in the other proceeding.
The plaintiffs in each proceeding advance a more detailed proposal. They propose that the two proceedings be heard together and that the solvency issue be the subject of a joint hearing. They propose that thereafter the s 588FG(2) defences be dealt with one after the other.
It seems to me that, if it is possible, there are significant benefits in one hearing and determination of the solvency issue in both proceedings. I am the docket judge in both matters and one hearing and determination will eliminate the possibility of inconsistent findings. One hearing on the solvency issue rather than two is likely to be more economical and may lead to a settlement of one or both proceedings without a further hearing. In the case of SMA Solar Technology, it will mean, should there be a finding in its favour on the solvency issue, that it will not have to prepare and call witnesses who will have to travel from Germany to deal with the s 588FG(2) defence. On the other hand, as the plaintiffs point out with force, a separate question on the solvency issue may delay the resolution of the proceedings with a separate judgment on the solvency issue and the possibility of appeals.
I have weighed these matters as carefully as I can. For three reasons I think the defendants’ proposal for a separate question is the preferable one. First, I think it is doubtful whether there are economies in defendants “coming and going” during a joint trial, particularly if the parties or their advisers or both come from outside the jurisdiction. Secondly, there appear to be advantages to SMA Solar Technology which is based in Germany in having the solvency issue determined first. Thirdly, and I do not put a great deal of weight on this because it is somewhat speculative, the claim against KerryJ Investment, although for a reasonably substantial sum, may also involve a substantial sum by way of costs. Commercial considerations may lead to a resolution of the proceeding once the solvency issue is decided. I acknowledge the uncertainties associated with a separate question in terms of advantages and disadvantages, but on balance I prefer the proposal advanced by the defendants.
The separate question should be formulated with precision. The question formulated in the proposed minutes may be unnecessarily wide. It is:
Did Solar Shop Australia Pty Ltd become insolvent within the meaning of s 588FC of the Corporations Act 2001 (Cth), and if so on what date?
On the face of it, the earliest payment made in either proceeding was on 17 May 2011. I will hear the parties as to the form of the question, but it may be sufficient to ask whether the company was insolvent and unable to pay its debts as and when they fell due for payment on 17 May 2011 and thereafter.
I will also hear the parties as to the orders to be made to advance the separate question to hearing.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate:
Dated: 19 May 2016
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