Friendship Corp Pty Ltd v Adamad Pty Ltd

[1984] FCA 386

Re: FRENDSHIP CORPORATION PTY. LIMITED
And: ADAMAD PTY. LIMITED and LES DYER
No. G295 of 1984
Federal Court - High Court and Federal Judiciary
57 ALR 81 / 6 FCR 351 (1985) ATPR para 40 - 500

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Federal Court - jurisdiction - application to restrain winding up proceeding in Supreme Court - alleged debt owed by applicant - claim under s.52 Trade Practices Act, 1974 for unliquidated damages against respondent - no single matter - no accrued jurisdiction - whether inherent jurisdiction should be exercised.

Federal Court Act, 1976 - s.23 - con.

Stack v. Coast Securities No.9 Pty. Ltd.(1983) 46 ALR 451; (1982) 49 ALR 193 - con.

Novasonic Corp. Pty. Ltd. v. Hagemeyer (Australasia) B.V. - unreported - Lockhart, J 27 October - con.

High Court and Federal Judiciary - Federal Court of Australia - Jurisdiction - Principal proceedings involving claims under the Trade Practices Act 1974 - Alleged misleading conduct and false representations in the course of negotiations of an agency agreement Application during course of principal proceedings to restrain application to State Supreme Court for a winding-up based on non-payment of fees alleged payable under the same agreement - Whether application disparate from federal claims - Trade Practices Act 1974 (Cth), ss 52, 80 - Federal Court of Australia Act 1976 (Cth), ss 5, 21, 22, 23 - Companies (New South Wales) Code, s 364(1)(e).

HEADNOTE

Held: An application for an order restraining a respondent from proceeding with an application, pursuant to s 364(1)(e) of the Companies (New South Wales) Code, to the New South Wales Supreme Court for an order that the applicant be wound up raises issues quite disparate and removed from a federal claim made under the Trade Practices Act 1974 relating to misleading conduct and false representations, even though the winding-up application was based on the non-payment by the applicant of fees for advertising services alleged to have been payable to the respondent pursuant to an agreement between the parties and the Federal claim was based on conduct of the respondent during the course of negotiations of that same advertising agreement.

Novasonic Corporation Pty Ltd v. Hagemeyer (Australasia) B V (Federal Court of Australia, Lockhart J, 27 October 1983, unreported); Stack v. Coast Securities No 9 Pty Ltd (1983) 46 ALR 451; 49 ALR 193, referred to.

Although the debt of the first respondent was a necessary ingredient in the winding-up proceedings, the ultimate issue in winding-up proceedings would be the solvency of the applicant, with the interests of creditors generally being paramount.

IOC Australia Pty Ltd v. Mobil Oil Australia Ltd (1976) 49 ALJR 176; In re Imperial Guardian Life Assurance Society (1869) LR 9 Eq 447; Club Marconi of Bossley Park Social Recreation Sporting Club Ltd v. Rennat Constructions Pty Ltd (1980) 4 ACLR 883; Re Jeff Reid Pty Ltd (1980) 5 ACLR 28; In Re QBS Pty Ltd (1967) Qd R 218; Processed Sand Pty Ltd v. Theiss Contractors Pty Ltd (1983) 1 NSWLR 384, referred to.

Accordingly the Federal Court had no jurisdiction as part of its accrued or attached jurisdiction to deal with the winding-up proceedings.

HEARING

Sydney, 1984, November 19, 20. #DATE 20:11:1984

NOTICE OF MOTION

Notice of motion seeking an order restraining the first respondent from proceeding with its application to the Supreme Court of New South Wales for an order that the applicant be wound up.

M G Sexton, for the applicant.

F G Lever, for the respondents.

Cur adv vult

Solicitors for the applicant: Brock Partners.

Solicitors for the respondents: Kosmin & Associates.

GFV

ORDER

1. The application the subject of the notice of motion dated 16 November 1984 be dismissed.

2. The applicant pay the respondents' costs of the application (excluding the costs of the preparation and service of the notice under s.78B of the Judiciary Act 1903).

Application dismissed

JUDGE1

This is an application for interim relief made in the course of principal proceedings brought by the applicant against the respondents alleging contraventions of s.52 of the Trade Practices Act, 1974. In the present application, made by notice of motion filed on 19 November 1984, the applicant now seeks to restrain the first respondent from proceeding with an application made by the first respondent to the Supreme Court of New South Wales for an order that the applicant be wound up. The application to the Supreme Court is made pursuant to s.364(1)(e) of the Companies (New South Wales) Code, the allegation being that the applicant is unable to pay its debts.

1. To support that application, the first respondent relies upon a statutory notice of demand served upon the applicant on 2 August 1984. The notice demanded payment within 21 days of its service of the sum of $52,566.49 said to be owing by the applicant to the first respondent in respect of fees for services rendered as the advertising agent of the applicant. No payment has been made in response to the demand.

2. By letter dated 23 August, the applicant, by its solicitors, denied that it was indebted to the first respondent, and referred to the institution of these proceedings and foreshadowed a claim for injunctive relief in the event that the first respondent proceeded on the notice of demand. On 21 August, shortly prior to the expiration of the period stipulated in the statutory notice of demand, the applicant commenced these proceedings. By its statement of claim, the applicant alleges the retainer by it of the first respondent as its advertising agent for the purpose of producing and placing television and radio advertisements and media publications in the form of newsletters. It further alleges that the second respondent acted as agent for the first respondent for the purpose of procuring agreements between the first respondent and the applicant. The statement of claim then alleges contraventions of s.52 and consequent damage in this way:
   
   

"6. Prior to entering into the agreement the First Respondent and alternatively the Second Respondent on behalf of the First Respondent during the course of negotiations in respect of the agreement made certain representations to the applicant that is to say:-

(a) That the First Respondent was an accredited advertising agent.

(b) That the First Respondent had experience in handling large clients such as Norman Ross Discounts, Nock & Kirby and Kaiser Corporation and that this experience would be applied to the Applicant's television, radio and media programs.

(c) That existing retailers and distributors would be given initially high impact media support on a regional basis and this would ensure a substantial up-surge in sales from existing locations.

7. In making such statements the First Respondent and the Second Respondent engaged in trade and commerce in Australia which was at all material times misleading and/or deceptive or likely to mislead and/or deceive in contravention of section 52 of the Trade Practices Act, 1974 - 1980 and each of the representation (sic) of fact which was likely to and did induce the Applicant to enter into a contract and each representation was false at the time it was made.

8. In consequence of the true state of affairs the Applicant has lost six distributors as television advertisements did not contain 'supers' which would detail the place where the Applicant's products could be purchased through distributors and printed materials were not made available in time for the television and radio campaign."

1. By its application filed with the statement of claim, the applicant seeks, inter alia, the following relief: a declaration that the first respondent engaged in conduct in contravention of s.52; a declaration that the agreement between the first respondent and the applicant is void or of no effect; an order that the first respondent be restrained from taking any action or commencing any proceedings or proceeding with any proceedings already commenced relating to the recovery of any amount under the agreement; and damages.

2. On 28 September, a directions hearing in the principal proceedings took place before Wilcox, J.. By consent of the parties, orders were made for the filing of pleadings and for discovery and interrogatories. The matter was stood over to 8 February 1985.

3. On 10 October 1984, the first respondent filed in the Equity Division of the Supreme Court a summons seeking the winding up of the applicant pursuant to s.364(1)(e) of the Companies (New South Wales) Code. The affidavit supporting the summons alleges that the applicant is insolvent and relies on the applicant's failure to comply with the statutory notice of demand. The summons was served on 11 October. It was returnable on 7 November. On that day, it was adjourned by consent to 21 November.

4. In support of its notice of motion, the applicant read an affidavit by its solicitor, Mr. G.B. Veitch, reciting the history of the litigation as set out above. Mr. Veitch swore a further affidavit in these terms:
   
   

"1. I am the Solicitor for the Applicant in this matter.

2. I refer to the affidavit sworn by me on 15 November 1984 and filed in these proceedings.

3. From my knowledge of the carriage of this matter and the instructions received by me I say that the Statement of Claim filed by the Applicant is based upon the agreement which gives rise to the debt alleged by the Respondents and that the damages claimed by the Applicant are equal to or greater than the said debt."

1. Although Mr. Veitch was not cross-examined, the material contained in paragraph 3 of his affidavit is on its face argumentative, and thus of little, if any, weight. No other evidence was adduced.

2. A question arises at the outset as to the jurisdiction of this Court to restrain winding-up proceedings taken in the Supreme Court (see Novasonic Corporation Pty. Limited v. Hagemeyer (Australasia) B V - unreported - 27 October 1983, Lockhart, J.) The applicant relies, for jurisdiction for the relief it now seeks, upon s.23 of the Federal Court Act, 1976. Reference is also made to the reasoning of Fitzgerald, J. in Stack v. Coast Securities No. 9 Pty. Limited (1983) 46 ALR 451 at p 487-8 and the cases there cited. His Honour there held that:
   
   

"... while the decision of the High Court in Thomson Australian Holdings Pty Ltd v Trade Practices Commission, supra, establishes that s 80 of the Trade Practices Act is the exclusive source of this court's power to grant a final injunction restraining conduct which is in contravention of a provision of that Act, it is at least sufficiently arguable for interlocutory purposes that the court has power to grant interlocutory injunctions restraining conduct which is not in contravention of the Act but which might render nugatory any substantive relief which is within the court's power in the proceedings:".

1. His Honour relied for this purpose on the inherent power of the Federal Court and referred also to ss.5, 2l, 22 and 23 of the Federal Court Act. Section 80 of the Trade Practices Act was widened after the decision in Thomson, but this seems immaterial for present purposes.

2. In my opinion, the present case can be distin guished from cases such as Stack, supra. In the context of a suit for specific performance and claims made under s.52 of the Trade Practices Act in that very connection, as the High Court later there held (see (1983) 49 A.L.R. 193), it can properly be said that only one "matter" is involved. In that way, the Federal Court can exercise its accrued jursidiction over the non-federal claim and thus resolve the dispute between the parties. Here, however, there are distinct and severable claims. The proceedings for the winding-up of the applicant should, in my opinion, be seen as raising issues quite disparate and removed from the federal claim now made under the Trade Practices Act. In the winding up proceedings, although the debt of the first respondent is a necessary ingredient (cf. IOC Australia Pty. Limited v. Mobil Oil Australia Limited (1976) 11 ALR 417 at p 427), the ultimate issue is the solvency of the applicant. The question whether relief is there to be granted will be considered by that Court on the footing that the interest of creditors generally is paramount (see the observations made by Lockhart, J. in Novasonic, supra, at p.9). In particular, it has been said that a winding-up petition is not to be used as machinery for trying a common law action (see In Re Imperial Guardian Life Assurance Society (1869) LR 9 Eq 447 at p 450; Club Marconi of Bossley Park Social Recreation Sporting Club Limited v. Rennat Constructions Pty. Limited (1980) ACLC 34,199 at p 34,202; Re Jeff Reid Pty. Limited and the Companies Act (1980) 5 ACLR; In Re QBS Pty. Limited (1967) Qd R 218; Processed Sand Pty. Limited v. Thiess Contractors Pty. Limited (1983) 1 NSWLR 384).

3. These considerations indicate that it is not appropriate to treat the claim made under the Trade Practices Act in this Court and the winding-up proceedings as one matter. In my opinion, therefore, this Court has no jurisdiction, as part of its accrued or attached jurisdiction, to deal with the winding-up proceedings.

4. Moreover, in my view, it cannot be said that to permit the winding-up proceeding to continue would, in the language of Fitzgerald, J., render nugatory any substantive relief which is within the Court's power in the proceedings under s.52: at worst from the applicant's standpoint, if a winding-up order is made, it is open to the liquidator to continue the proceedings through the name of the applicant company. At best from the applicant's standpoint, it is still open to it to seek to persuade the Supreme Court that the debt is, within the meaning of the authorities in this area, a genuinely disputed one and that, in any event, it is solvent. In those circumstances, the Supreme Court would ordinarily order that the petition be dismissed or stayed, or adjourn it to some future date. However, nothing that I have said in these reasons is in any way intended to govern or even suggest the course that the Supreme Court should take in that connection.

5. In the result, I am of the opinion that the relief now sought should be refused. I propose to dismiss the application for interim relief.