Galler, David v DDS Investments Pty Ltd

[1997] FCA 313

FOR LIMITED DISTRIBUTION ONLY

CATCHWORDS

CORPORATIONS LAW - Winding up - Substitution of parties - Applicants for substitution either creditors or shareholders of respondent - Time elapsed since application for winding up was commenced - Purpose of person funding the applicants for substitution - Delay by applicants for substitution - Agreement by original applicants to withdraw as soon as possible - Purpose of power of substitution of parties - Period within which winding up application must be brought - Extension of period - Whether special circumstances to justify extension

Corporations Law s 465B, 459R

GALLER & Ors v DDS INVESTMENTS PTY LTD
VG 3488 of 1996

Before:          NORTH J
Place:            MELBOURNE
Date:             24 MARCH 1997

IN THE FEDERAL COURT
OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 3488 of 1996

IN THE MATTER OF DDS INVESTMENTS PTY LTD
(ACN 069 836 764)

B E T W E E N :

DAVID GALLER  Applicant
  ELIZABETH AITKEN  Second Applicant
  FRANK MULVIHILL  Third Applicant
  JAMES HADFIELD ZOHRAB       Fourth Applicant
  PATRICIA ROSEMARY ZOHRAB   Fifth Applicant
JEROME GLAZEBROOK WHYTE &
  MARGARET ANN WHYTE (as Trustees
  of the Kennels Trust)  Sixth Applicant
JOHN MUNDELL EWART           Seventh Applicant
  JENNIFER ELIZABETH EWART  Eighth Applicant

AND
  DDS INVESTMENTS PTY LTD
(ACN 069 836 764)  Respondent

MINUTES OF ORDERS

BEFORE:     North J
PLACE:       Melbourne
DATE:         24 March 1997

THE COURT ORDERS THAT:

1.  That Ross Murray Tanner and Jennifer Anne Fleetwood be substituted as applicants;

2.  That the substituted applicants amend the application accordingly;

3.  That the substituted applicants serve on the respondent personally this order, the amended application and any further affidavits on which they propose to rely in support of the application by 7 April 1997;

4.  That the supporting creditors file and serve any affidavits upon which they intend to rely by 7 April 1997.  

5.  That the respondent file and serve any affidavits upon which it intends to rely in opposing the application by 21 April 1997;

6.  That the period within which the application must be determined is extended to 4.15 pm on 28 April 1997;

7.  Leave to the original applicants, David Galler, Elizabeth Aitken, Frank Mulvihill, James Hadfield Zohrab, Patricia Rosemary Zohrab, Jerome Glazebrook Whyte and Margaret Ann Whyte (as trustees of the Kennels Trust), John Mundell Ewart and Jennifer Elizabeth Ewart to withdraw as applicants;

1. That the proceedings are adjourned to a directions hearing at 9.45 am on 28 April 1997;

9.  That the respondent pay the substituted applicants’ costs of and incidental to the application for substitution and the application for the extension of time within which the application is to be determined. 

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

IN THE FEDERAL COURT
OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 3488 of 1996

IN THE MATTER OF DDS INVESTMENTS PTY LTD
(ACN 069 836 764)

B E T W E E N :

DAVID GALLER  Applicant
  ELIZABETH AITKEN  Second Applicant
  FRANK MULVIHILL  Third Applicant
  JAMES HADFIELD ZOHRAB       Fourth Applicant
  PATRICIA ROSEMARY ZOHRAB   Fifth Applicant
JEROME GLAZEBROOK WHYTE &
  MARGARET ANN WHYTE (as Trustees
  of the Kennels Trust)  Sixth Applicant
JOHN MUNDELL EWART           Seventh Applicant
  JENNIFER ELIZABETH EWART  Eighth Applicant

AND
  DDS INVESTMENTS PTY LTD
(ACN 069 836 764)  Respondent

BEFORE:     North J
PLACE:       Melbourne
DATE:         24 March 1997

EX TEMPORE REASONS FOR JUDGMENT

This is an application pursuant to s 465B(1) of the Corporations Law for the substitution of Ross Murray Tanner and Jennifer Anne Fleetwood as applicants in the present application. The applicants for substitution claim standing to bring the application for winding up of the respondent on the alternative bases that they are either creditors or shareholders of the respondent. Their claim to be creditors is based on their allegation that they offered to purchase shares in the respondent and forwarded the purchase price of the shares together with their offer. They withdrew the offer before acceptance and the respondent was bound to repay the purchase price. The respondent has not repaid the purchase price and is indebted to the applicants for substitution for the amount of the purchase price. Further, the applicants for substitution claim that the respondent promised to repay the purchase price before it accepted their offer, and the failure to do so in all the circumstances make it just and equitable that the respondent be wound up.

Alternatively, the applicants for substitution contend that, if there was a binding contract for the purchase of shares, then the applicants are shareholders of the respondent. On this basis, they claim that the affairs of the respondent have been so conducted that it is just and equitable for the respondent to be wound up. In my view, either of the alternative bases provides standing for the applicants for substitution to be substituted as applicants.

Mr Jacobson, who appeared on behalf of the respondent, contended that there were a number of reasons which should persuade the Court to refuse the application for substitution. First, he argued that seven months have elapsed since the commencement of the application and consequently the allegations made in respect of the time when the application was filed may not be indicative of the present position of the company. That is a question which will need to be determined on the hearing of the application for winding up.  If the applicants for substitution are unable to make good their allegations at the time of the hearing, then their application will fail.

Second, Mr Jacobson referred to what he said was a collateral and mischievous purpose lying behind the alleged funding of the application by Mr John Zohrab, one of the supporting creditors.   The intention of Mr Zohrab in funding the proceedings is irrelevant to the basis upon which the application for substitution is made.  If the applicants for substitution have standing, it seems to me unimportant that a person who may be funding their application has reasons of his own to take that step.

Third, Mr Jacobson contended that the applicants for substitution have delayed in bringing their application before the Court. The application for substitution arose only when the current applicants determined not to proceed with their application because they had come to some arrangement in respect of their claims against the respondent. That occurred in December 1996.  The time between then and now has elapsed not as the result of any fault by the applicants for substitution, but as a result of the unavailability of hearing dates and the failure of the respondent to be ready to proceed on an earlier application on 21 February 1997.

Finally, Mr Jacobson argued that the application for substitution should be refused because it arose out of the breach of the agreement of the original applicants to withdraw the current application.  The original applicants apparently came to their agreement in December 1996.  Mr Jacobson argued that if they had acted in accordance with their agreement to seek leave to withdraw "as soon as practicable", the application would have been dismissed before the investors sought substitution.  In this way he contended that the applicants for substitution were claiming a benefit from the breach of agreement of the original applicants. The original applicants do not appear to me to have acted in breach of the agreement. They brought the application for withdrawal as soon as practicable. They appeared before the Court in December but the matter was adjourned for reasons outside their control. In any event, the consequences of an earlier withdrawal by the original applicants is speculative. If the original applicants had applied earlier the substitution application may have been made earlier. Thus, the final matter is not relevant to the question of the exercise of discretion.

One purpose of the power to allow substitution of applicants is to avoid a multiplicity of proceedings. That purpose is served by allowing substitution in this case. If the application was refused the applicants for substitution would need to incur the expense and inconvenience of commencing a fresh application. Consequently, in all the circumstances, I order that the applicants for substitution, Ross Murray Tanner and Jennifer Anne Fleetwood, be substituted as applicants in this application.

On 7 March 1997, I made orders which had the effect of extending the time for the disposition of this application under s 459R until the determination of the substitution application. I have today determined the substitution application and the substituted applicants now seek a further extension of time under s 459R(2) to allow the application for winding up to proceed. Mr Jacobson contended that the time should not be extended because there are no special circumstances which justify the extension.

I do not accept that submission.  The reason that the winding up application has not been determined has, in some significant degree, been as a result of applications made by the respondent for adjournments to allow it to file affidavits in relation to a number of interlocutory applications and also to enable the respondent to have discussions with the original applicants.  Those discussions ultimately resulted in the applicants agreeing to withdraw their application.

When this matter first came on before me on 21 February 1997 before the six month period specified in s 459R(1) had passed, the respondent requested an adjournment for two reasons. One was so that it could have discussions with the now substituted applicants to better understand the basis of their claim to substitution and, secondly, to allow affidavits to be filed on behalf of the respondent.

The circumstances in which the application is made by the substituted applicants is almost identical to the circumstances in which the original applicants made their applications. In a sense, the circumstances amount to one transaction, at least from the point of view of the respondent. In those circumstances, it seems to me that there do exist the requisite special circumstances for the time to be extended under s 459R(2).

I therefore make the following orders:

1. That Ross Murray Tanner and Jennifer Anne Fleetwood be substituted as applicants;

1. That the substituted applicants amend the application accordingly;

1. That the substituted applicants serve on the respondent personally this order, the amended application and any further affidavits on which they propose to rely in support of the application by 7 April 1997;

1. That the supporting creditors file and serve any affidavits upon which they intend to rely by 7 April 1997.  
   
   

2. That the respondent file and serve any affidavits upon which it intends to rely in opposing the application by 21 April 1997;

1. That the period within which the application must be determined is extended to 4.15 pm on 28 April 1997;

1. Leave to the original applicants, David Galler, Elizabeth Aitken, Frank Mulvihill, James Hadfield Zohrab, Patricia Rosemary Zohrab, Jerome Glazebrook Whyte and Margaret Ann Whyte (as trustees of the Kennels Trust), John Mundell Ewart and Jennifer Elizabeth Ewart to withdraw as applicants;

1. That the proceedings are adjourned to a directions hearing at 9.45 am on 28 April 1997;

1. That the respondent pay the substituted applicants’ costs of and incidental to the application for substitution and the application for the extension of time within which the application is to be determined. 

I certify that this and the preceding
six (6) pages are a true copy of the reasons
for judgment of his Honour Justice North.

Associate:
Dated:           28 April 1997

APPEARANCES

Counsel appearing for the applicant:        Mr K. Baker
Solicitors for the applicant:  Coadys

Counsel appearing for the respondent:      Mr A. Jacobson
Solicitors for the respondent:                  George James

Date of hearing:  24 March 1997
Date of judgment:  24 March 1997