Dewina Trading Sdn BHD v Ion International Pty Ltd

[1996] FCA 1054

DEWINA TRADING SDN BHD v. ION INTERNATIONAL PTY LIMITED
No. NG 3348 of 1996
FED No. 1054/96
Number of pages - 6
Corporations

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
MOORE J

CATCHWORDS

Corporations - Whether Court has power to make an order winding up a company when another Court has already made such an order

Beneficial Finance Corporation Ltd v East Coast Printers Circuits Pty Ltd (1992) 10 ACLC 4226
Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589
Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1
Commonwealth v Emanuel Projects Pty Ltd (1996) 14 ACLC 1,351

HEARING

SYDNEY, 11 and 18 November 1996
Written Submissions Complete: 22 November 1996
#DATE 29:11:1996
#ADD 11:12:1996

Counsel for the Applicant : Mr B Connell

Solicitor for the Applicant : Gillis Delaney Brown

ORDER

THE COURT ORDERS THAT:

1. The application under s459P is dismissed.

2. The respondent pay the applicant's costs including reserved costs.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

MOORE J On 4 June 1996, Dewina Trading SDN BHD ("Dewina") filed an application under s459P of the Corporations Law seeking an order winding up Ion International Pty Limited ("Ion"). Dewina is a Malaysian corporation. The application was based on the failure of Ion to comply with a statutory demand.

2. The application was returnable on 8 August 1996. Several interlocutory issues arose. The most significant was whether the application under s459P was an abuse of process and accordingly whether it should be stayed. This was said to arise because the statutory demand upon which it was based had been served on the registered office of Ion but, it was alleged, in circumstances where there was no connection between the registered office and the business of Ion. That issue was accepted by counsel appearing for Dewina as one of substance and it was the subject of a hearing on 30 August 1996. Judgment was given on 24 September 1996. No order was made staying the application under s459P.

3. The matter came before the Court on several occasions in September, October and November 1996. By mid-November 1996, Dewina was seeking, summarily, an order winding up Ion. On 11 November 1996 evidence was led and submissions made in support of such an order. By then the proceedings were being heard ex parte. On 11 November 1996 I reserved judgment on the basis that it would necessary to review the affidavit evidence filed.

4. On 12 November 1996, an order was made by a Registrar of the Supreme Court of New South Wales winding up Ion on the application of Post Production Services Australia Pty Ltd (In Liq). The solicitors acting for Dewina informed my associate of that fact the following day though the Registry may have been informed earlier. I was, until then, not aware of the proceedings in the Supreme Court and I do not know the circumstances in which, and when, Dewina or its solicitors became aware of the Supreme Court proceedings.

5. I listed the application in this Court of my own motion on 18 November 1996. I was then invited to make an order winding up Ion notwithstanding that an order to the same effect had been made a week earlier in the Supreme Court of New South Wales. I invited counsel for Dewina to provide written submissions dealing with both my power to follow that course and why, if power existed, such an order should be made. Written submissions have since been provided.

6. A second order winding up a company under the Corporations Law is unusual, if not unprecedented. Reference was made to several authorities supporting the making of such an order: see Re Filby Bros (Provender), Ltd (1958) 2 All ER 458, Re Audio Systems, Ltd (1965) 2 All ER 919, Re The Provincial and Suburban Bank, Limited (1879) 5 VLR(Eq) 159, In Re The Cognac Company - Dwyer and Kelly's Case (1877) 3 VLR 146 and Reeves v Bowden (1869) 6 VLR 218. I was also referred to authority dealing with two winding up proceedings brought in the one Court. A second application may constitute an abuse of process: see Beneficial Finance Corporation Ltd v East Coast Printers Circuits Pty Ltd (1992) 10 ACLC 426.

7. However, the power of this Court, and the manner in which it should be exercised, must be determined by reference to the legislative scheme embodied in the Corporations Law. The power to make an order winding up a company is plainly a discretionary one: see s459A and, in particular, s467(1)(a). Ordinarily a situation would not arise, once a Court made an order winding up a company, in which another application could be pursued for the same purpose. The prosecution of the other proceedings would be prevented, subject to the grant of leave, by s471B. In the present case, however, I had reserved judgement before the order was made in the Supreme Court of New South Wales.

8. The legislative scheme in the Corporations Law for the winding up of companies contemplates that any order made by a Court inures for the benefit of not only the creditor making the application but for all creditors: see s471(1). This suggests that the legislative scheme contemplates the making of only one order benefiting all creditors. Moreover, the scheme contemplates the appointment of a liquidator: see s472, who then takes into his or her custody or control the company's property: see s474, and thereafter causes the company's property to be collected and applied in discharging the company's liabilities: see s478.

9. It is inconsistent with that scheme that two orders might be made winding up a company with the consequential appointment of two liquidators. Even if, as suggested by counsel for Dewina, an order could made in this Court appointing the same liquidator as was appointed by the Supreme Court, issues would then arise about the relevant relation back day for the purposes of provisions such as s588FE. In addition, a difficulty may well arise about the operation of s556(1)(b). Plainly and understandably, in these proceedings Dewina is concerned about its costs. Were a second winding up order made, then its costs might be payable in the priority identified in s556(1). But so too would the costs of the applicant in the proceedings in the Supreme Court. It may be accepted that s559 provides a mechanism for the payment of debts in a class identified s556(1) when there is more than one such debt. However, s556(1)(b) is, in my opinion, drafted on the basis that there will only be one set of applicant's taxed costs payable under s466 arising from the one proceedings.

10. Many of these considerations arose, in a different statutory context, in Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 which concerned two events leading to the sequestration of the estate of a bankrupt twice. The first event was the presentation and acceptance of the debtor's petition and the second was an order of the Court on a creditor's petition. Plainly the judgment of the High Court turned on the provisions of the Bankruptcy Act 1966, though at pp 596 and 597 there is a discussion about the consequences of the sequestration of a bankrupt's estate twice. In their joint judgment Gibbs CJ, Murphy, Brennan and Dawson JJ said:

"It is unlikely that the Parliament intended that it should be possible for two persons to be, separately, trustees for what might be, virtually or even entirely, one estate, for this could lead to chaos in administration, and this supports the conclusion that it is contrary to the policy of the Act to make a sequestration order a petition founded on a debt that is already provable." (at 597)

11. It may be accepted that s513A of the Corporations Law contemplates a winding up order being made by the Court in circumstances where the company was already being wound up. However, that and related provisions appear to concern a situation where a company is being wound up voluntarily under Part 5.5. So much is apparent from s467B which authorises the making of an order under, relevantly, s459A, even if the company is being wound up voluntarily.

12. My consideration of this issue has been limited. That is so because the suggestion that a second winding up order should be made arose at a time when the period of six months provided for in s459R was about to expire. Once it does, the application is then dismissed by operation of the Act: see s459R(3). That period expires early next week. It may have been open to me to extend the period in which the application might be determined under s459R(2), and thus gain more time to give the matter further consideration. However I have decided that the preferable course is to give judgment within that period and thus preserve such rights as Dewina may have in any appeal from this judgment, were they minded to pursue the matter and obtained the requisite leave which may be given by this Court: see Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1.

13. A suggestion was made in the written submissions that an order might be made giving Dewina equal priority under s556 as the applicant in the proceedings in the Supreme Court of New South Wales. However, unless there is power to make a second order winding the company up then no costs order could, in my opinion, be made in these proceedings in this Court that would confer priority by operation of s556(1)(b). I have concluded there is no power to make a second order winding up Ion and accordingly I can not make any order as to costs of the type referred to in s556(1)(b).

14. These proceedings reveal, in my opinion, an anomaly in the operation the Corporations Law. It appears Dewina has pursued diligently its application for an order winding up Ion in the Federal Court of Australia. The material filed by Dewina in this Court would indicate a winding up order could have been made had the earlier order not been made by the Supreme Court of New South Wales. Whether the interlocutory issues raised by Ion in the Federal Court were raised for the purposes of delaying the making of a winding up order I cannot say with any certainty. It may well be, however, that they were. It seems anomalous that an applicant in this Court can be deprived, potentially, of its costs because proceedings were instituted in another Court which led to the making of a winding up order before the matter was finally addressed in this Court. I am not aware of when Dewina and its solicitors became aware of the proceedings in the Supreme Court. I am not aware of whether, prior to the hearing in the Supreme Court on 12 November 1996, the applicant in that Court was aware of the proceedings in this Court and, if so, when. The Supreme Court was made aware of the proceedings in this Court on that day. What occurred in the Supreme Court on 12 November 1996 was described in an affidavit filed in this Court by the solicitor having carriage of the matter for Dewina. She said:

"3. On that occasion I attended at the Supreme Court. Gillis Delaney Brown had not filed a Notice of Appearance in the Supreme Court. As it was apparent that Registrar Berecry was going to make a winding-up Order against the respondent, to protect the applicant's rights, to the best of my knowledge and belief, I made the following submissions to the Registrar:

Touhill:-

"I seek leave to appear. I act for Dewina Trading, the applicant in Federal Court winding-up proceedings against Ion. Our client filed an Application to wind-up Ion in the Federal Court on 4 June 1996. Yesterday Judge Moore of the Federal Court heard our client's winding-up application and reserved his judgement (sic). If you are minded to grant an Order in the application to wind-up the respondent, I seek the matter be adjourned to enable Judge Moore to hand down his reserved decision. There is an issue as to our client's prejudice in relation to its priority costs in the liquidation."

The Registrar said:-

I'll stand the matter down in the list"

4. Registrar Berecry called the matter again. I made further oral submissions. To the best of my knowledge and belief those submissions were as follows:

"Registrar if you are minded to make an Order, I would request that John Mann of William Buck, chartered accountants be appointed as the liquidator on the grounds that he has been requested by our client in the Federal Court proceedings and that he has already been briefed with substantial information regarding Ion."

5. I made a further oral submission to the Registrar. To the best of my knowledge and belief those submissions were as follows:-

"Our client is owed $150,000.00 in the Federal Court proceedings. There are other creditors in the Federal Court proceedings which are owed approximately $200,00.00."

6. Registrar Berecry then said:-

"I have no evidence of that."

7. Registrar Berecry then proceeded to make an Order winding-up the respondent.

15. There is no evidence showing which proceedings were commenced first. In my opinion, orders could have and should have been made in this Court or the Supreme Court regularising the hearing of both matters before any winding up order was made. They might have included a cross-vesting order.

16. There are affidavits in the Court papers in the Federal Court, filed by Dewina, that seek to make out a case that a Malaysian corporation seeking to trade in Australia retained the services of an Australian company, Ion, to provide marketing advice and services. I should emphasise that this material was never tested and is contentious. It also reveals conduct by individuals acting on behalf of Ion that, at best, was of dubious commercial morality. If that be so, and Ion was indebted to Dewina for a sum in the order of $150,000, one could readily understand a critical view being taken by the Malaysian principals of Dewina about the complexity of the Australian legal system and its operation which may, at least potentially, have failed to secure for them, not only some or all of the monies they are owed, but also some or all of the costs of pursuing the recovery of it.

17. I order that the application by Dewina, under s459P be dismissed and that Ion pays Dewina's costs including any reserved costs.

18. Since writing these reasons, my attention has been drawn to a judgment of Branson J Commonwealth v Emanuel Projects Pty Ltd (1996) 14 ACLC 1,351 which fortifies the conclusion I have reached.