Frauenstein v Farinha

Case [2008] FCA 1166

FEDERAL COURT OF AUSTRALIA

Frauenstein v Farinha [2008] FCA 1166

CARL FRAUENSTEIN & ANOR v TOBIAS FARINHA & ORS

NSD 2135 OF 2006

EMMETT J
25 JULY 2008
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 2135 OF 2006

BETWEEN:

CARL FRAUENSTEIN
First Plaintiff

CARPE DIEM INITIATIVES PTY LTD ACN 091 071 391
Second Plaintiff

AND:

TOBIAS FARINHA
First Defendant

MIGUEL FARINHA
Second Defendant

MARCO ZAGATO
Third Defendant

SAN MARCO BONDI JUNCTION PTY LTD
Fourth Defendant

SAN MARCO PICOLLO PTY LTD
Fifth Defendant

SAN MARCO WORLD SQUARE PTY LTD
Sixth Defendant

COCKLE BAY SAN MARCO PTY LTD
Seventh Defendant

EQUAL 54 LTD
Eighth Defendant

JAMES PANAGOPOULOS
Ninth Defendant

TOBY BONDI JUNCTION PTY LTD
Tenth Defendant

MARCO BONDI JUNCTION PTY LTD
Eleventh Defendant

MIGUEL BONDI JUNCTION PTY LTD
Twelfth Defendant

CINE SAN MARCO PTY LTD
Thirteenth Defendant

ANDREW ALAN JOHNSON
Fourteenth Defendant

DEPUTY COMMISSIONER OF TAXATION
Supporting Creditor

CHIEF COMMISSIONER OF STATE REVENUE
Supporting Creditor

JUDGE:

EMMETT J

DATE OF ORDER:

25 JULY 2008

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The interlocutory process filed on 8 February 2008 be treated as an originating process and a new court file be prepared accordingly.

2.The interlocutory application filed on 20 May 2008 be treated as filed in the separate proceedings commenced on 8 February 2008.

3.The Deputy Commissioner of Taxation be substituted as plaintiff in the separate proceedings.

4.The substituted plaintiff amend the originating process accordingly.

5.The substituted plaintiff serve on the defendants a minute of this order and the amended originating process.

6.To the extent necessary, the substituted plaintiff publish a notice in accordance with Form 10 and otherwise comply with the requirements of the rules as if it were the former plaintiff making the application made in the deemed originating process.

7.The separate proceeding be adjourned for hearing before the Registrar on 1 August 2008.

8.The costs of the substituted plaintiff, of this application, be costs of the substituted plaintiff in the separate proceeding.

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

NSD 2135 OF 2006

BETWEEN:

CARL FRAUENSTEIN
First Plaintiff

CARPE DIEM INITIATIVES PTY LTD ACN 091 071 391
Second Plaintiff

AND:

TOBIAS FARINHA
First Defendant

MIGUEL FARINHA
Second Defendant

MARCO ZAGATO
Third Defendant

SAN MARCO BONDI JUNCTION PTY LTD
Fourth Defendant

SAN MARCO PICOLLO PTY LTD
Fifth Defendant

SAN MARCO WORLD SQUARE PTY LTD
Sixth Defendant

COCKLE BAY SAN MARCO PTY LTD
Seventh Defendant

EQUAL 54 LTD
Eighth Defendant

JAMES PANAGOPOULOS
Ninth Defendant

TOBY BONDI JUNCTION PTY LTD
Tenth Defendant

MARCO BONDI JUNCTION PTY LTD
Eleventh Defendant

MIGUEL BONDI JUNCTION PTY LTD
Twelfth Defendant

CINE SAN MARCO PTY LTD
Thirteenth Defendant

ANDREW ALAN JOHNSON
Fourteenth Defendant

DEPUTY COMMISSIONER OF TAXATION
Supporting Creditor

CHIEF COMMISSIONER OF STATE REVENUE
Supporting Creditor

JUDGE:

EMMETT J

DATE:

25 JULY 2008

PLACE:

SYDNEY

REASONS FOR JUDGMENT

  1. This proceeding, NSD 2135 of 2006, was commenced in 2006.  It involved allegations of oppressive conduct of certain of the defendants in respect of the affairs of other of the defendants, including the sixth defendant.  After many days’ hearing, I gave interim judgment, which included a money judgment against the sixth defendant. 

  2. Following the orders that I made, which did not finally resolve the proceeding, an interlocutory process was filed on 8 February 2008, seeking orders for the winding-up of the fifth, sixth, and seventh defendants.  The debts upon which the winding-up applications were based were judgment debts that I entered in the proceeding.  The circumstances in which the winding up application was made by interlocutory process filed in this proceeding, rather than way of separate proceeding, are not now clear. 

  3. For reasons that I shall state in a moment, it seems to me to be desirable to order that the interlocutory process filed on 8 February 2008 be treated as an originating process and be treated as an entirely  separate proceeding from proceeding NSD 2135 of 2006.  The reason why that course is desirable is that, on 20 May 2008, the Deputy Commissioner of Taxation (the Commissioner) filed an interlocutory application seeking to be substituted as plaintiff pursuant to s 465B of the Corporations Act 2001 (Cth) (the Corporations Act).  That course was adopted because of some concern, it appears, on the part of the Commissioner as to whether the original plaintiffs intended to prosecute the winding-up application.  The doubt is occasioned by the fact that, for some considerable time, there have been negotiations between the plaintiffs and certain of the defendants in the original proceeding concerning the compromise of the balance of the proceeding still to be resolved.  For that reason, the original plaintiffs did not wish to press on with the winding-up application.

  4. When the matter of the Commissioner’s interlocutory application of 20 May 2008 first came before me, the question that arose was how, as a matter of practicality, the Commissioner could be substituted in a proceeding seeking relief in respect of oppression.  Part of the relief, for example, concerned a claim for damages and for an account of profits, as well as orders for the purchase of shares in the fifth, sixth, and seventh defendants.  It would have been quite impracticable for the Commissioner to have been substituted as plaintiff in respect of that relief, particularly when it was clear that different legal teams would be advising different plaintiffs. 

  5. In those circumstances, it is clearly desirable for the step that I have foreshadowed to be taken, namely, for the interlocutory process seeking winding-up to be treated as an originating process.  Accordingly, I propose to give the directions that I have foreshadowed and then to order in a new proceeding that the Commissioner be substituted as plaintiff in that new proceeding. 

I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:        10 September 2008

Counsel for the Plaintiffs: Mr P Dillon
Solicitor for the Plaintiffs: Foulsham & Geddes
Counsel for the Commissioner: M P Walsh
Solicitor for the Commissioner: Craddock Murray Neumann
There was no appearance by the Defendants.
Date of Hearing: 25 July 2008
Date of Judgment: 25 July 2008
Details
AGLC
Frauenstein v Farinha [2008] FCA 1166
Case
[2008] FCA 1166
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Frauenstein v Farinha involved a dispute concerning the substitution of a party in proceedings initiated by the Commissioner of Taxation. The Commissioner had originally filed proceedings against the defendants but subsequently sought to be substituted by the Deputy Commissioner of Taxation. The defendants opposed the substitution, raising issues about the validity of the proceedings and the application for substitution. The court was required to determine whether the application for substitution was valid and whether it complied with the relevant procedural rules.

The primary legal issues before the court were whether the interlocutory process filed on 8 February 2008 could be treated as an originating process and whether the application filed on 20 May 2008 could be considered as filed in the separate proceedings. Additionally, the court had to assess whether the Deputy Commissioner of Taxation could be substituted as the plaintiff and if the procedural requirements for substitution had been met. The court also needed to consider the implications of the substitution on the costs and the need for further publication and service of the amended originating process.

The court found that the interlocutory process could indeed be treated as an originating process, and the application for substitution was valid. The Deputy Commissioner of Taxation was properly substituted as the plaintiff, and the procedural requirements for substitution were satisfied. The court emphasised the importance of ensuring that the defendants were adequately informed of the substitution and the need for the substituted plaintiff to comply with certain procedural obligations. The court ordered that the substituted plaintiff amend the originating process, serve a minute of the order and the amended originating process on the defendants, and publish a notice in accordance with the rules. The court also directed that the separate proceedings be adjourned for hearing and that the costs of the substituted plaintiff in the separate proceeding be treated as the costs of the substituted plaintiff in the application.

The orders of the court included treating the interlocutory process as an originating process, substituting the Deputy Commissioner of Taxation as the plaintiff, and directing the substituted plaintiff to amend the originating process, serve a minute of the order, and publish a notice. The court further ordered that the separate proceeding be adjourned and that the costs of the substituted plaintiff in the separate proceeding be treated as the costs of the substituted plaintiff in the application.

Orders

Orders of the court

1. The interlocutory process filed on 8 February 2008 be treated as an originating process and a new court file be prepared accordingly.

2. The interlocutory application filed on 20 May 2008 be treated as filed in the separate proceedings commenced on 8 February 2008.

3. The Deputy Commissioner of Taxation be substituted as plaintiff in the separate proceedings.

4. The substituted plaintiff amend the originating process accordingly.

5. The substituted plaintiff serve on the defendants a minute of this order and the amended originating process.

6. To the extent necessary, the substituted plaintiff publish a notice in accordance with Form 10 and otherwise comply with the requirements of the rules as if it were the former plaintiff making the application made in the deemed originating process.

7. The separate proceeding be adjourned for hearing before the Registrar on 1 August 2008.

8. The costs of the substituted plaintiff, of this application, be costs of the substituted plaintiff in the separate proceeding.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

EMMETT J

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Ratio Decidendi

Legal Principle Established

Established by: EMMETT J

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