JC International Investments Pty Limited v ZYX Learning Centres Limited (Formerly ABC Learning Centres Limited) (Receivers and Managers Appointed) (In Liquidation)
[2011] FCA 1036
•22 July 2011
FEDERAL COURT OF AUSTRALIA
JC International Investments Pty Limited v ZYX Learning Centres Limited (Formerly ABC Learning Centres Limited) (Receivers and Managers Appointed) (In Liquidation) [2011] FCA 1036
Citation: JC International Investments Pty Limited v ZYX Learning Centres Limited (Formerly ABC Learning Centres Limited) (Receivers and Managers Appointed) (In Liquidation) [2011] FCA 1036 Parties: JC INTERNATIONAL INVESTMENTS PTY LIMITED ACN 128 344 767 v ZYX LEARNING CENTRES LIMITED (FORMERLY ABC LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 File number(s): NSD 1776 of 2010 Judge: EMMETT J Date of judgment: 22 July 2011 Legislation: Corporations Act 2001 (Cth) s 500(2) Date of hearing: 22 July 2011 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 6 Counsel for the plaintiff: DL Cook Solicitor for the plaintiff: Maurice Blackburn Counsel for the defendant: K Lawson Solicitor for the defendant: Watson Mangioni
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1776 of 2010
BETWEEN: JC INTERNATIONAL INVESTMENTS PTY LIMITED ACN 128 344 767
PlaintiffAND: ZYX LEARNING CENTRES LIMITED (FORMERLY ABC LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664
Defendant
JUDGE:
EMMETT J
DATE OF ORDER:
22 JULY 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The notice to produce filed on 22 December 2010 be set aside.
2.The defendant’s notice of motion filed on 11 May 2011 otherwise be dismissed.
3.The plaintiff’s notice of motion filed on 26 May 2011 be dismissed.
4.Pursuant to s 500(2) of the Corporations Act2001 (Cth), the plaintiff have leave to commence and proceed with a civil proceeding against the defendant in the terms set out in the draft application and draft statement of claim that are, respectively, annexures BJS-B and BJS-C to the affidavit affirmed by Ben Slade on 17 December 2010.
5.The said leave be subject to the term that the plaintiff will not seek to enforce any judgment that it may obtain against the defendant without the further leave of the Court.
6.Liberty be granted to the parties to restore the proceeding on 48 hours’ notice.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1776 of 2010
BETWEEN: JC INTERNATIONAL INVESTMENTS PTY LIMITED ACN 128 344 767
PlaintiffAND: ZYX LEARNING CENTRES LIMITED (FORMERLY ABC LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664
Defendant
JUDGE:
EMMETT J
DATE:
22 JULY 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The defendant, ZYX Learning Centres Limited, which was formerly called ABC Learning Centres Limited (the Company), is in liquidation following a resolution for its voluntary winding up. The plaintiff, JC International Investments Pty Limited (JC International), has applied for an order under s 500(2) of the Corporations Act 2001 (Cth) (the Corporations Act) for leave to commence and prosecute a proceeding against the Company. Section 500(2) provides that, after the passing of a resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against a company except by leave of the Court and subject to such terms as the Court imposes.
JC International proposes to commence a proceeding against the Company. It intends to do so as the representative of members of a class, said to include shareholders in the Company who held shares during a relevant period. The proposed cause of action arises from the alleged failure of the Company, as a public company whose shares were listed on the Australian Securities Exchange, to comply with its disclosure obligations. It is to be alleged that that caused members of the class to suffer damage and financial loss.
The stay of proceedings provided for in s 500(2) is to ensure that a company in liquidation does not face a multiplicity of legal proceedings that are expensive, time-consuming and potentially unnecessary. In considering whether or not to grant leave under s 500(2), it is material for the Court to have regard to such matters as the degree and complexity of the legal and factual issues involved, whether the claim has some arguable merit, the amount and seriousness of the claim, and whether the contemplated proceeding would prejudice the creditors generally. It is also important to consider whether or not there is an insurance policy in place that could be called upon to meet the contemplated proceeding.
The material before the Court indicates that the proceeding contemplated by JC International has at least some prospect of success. In saying that, I do not express any view one way or the other as to the likelihood of success, other than to indicate that there is at least a serious question to be tried. The amount of the claim is for in excess of $500 million, and JC International has secured litigation funding for the claim. A draft statement of claim has been prepared, and the basis upon which the claim was brought indicates that it is made seriously.
The claim, as I have said, is based on the disclosure requirements imposed on listed entities by the Corporations Act. Those provisions themselves give rise to considerable legal complexity. The complexity of the factual and legal issues makes the proof of debt procedure, which is the alternative process for resolving the dispute, an unsuitable process. There could well be numerous separate proofs of debt, each of which would raise similar questions but each of which would have to be dealt with on an individual basis.
There is no procedure under the Corporations Regulations for multiple members of a class to submit a single proof of debt, save in respect of a a group of employees seeking wages or retrenchment packages. The costs to the Company of having the class claims determined by a Court are likely to be less than the costs of having the liquidator determine what might amount to thousands of individual proofs. The liquidator of the Company does not oppose the grant of leave, and has indicated that the Company’s insurer has undertaken the defence of the proceeding. In all of the circumstances, I consider that it is appropriate to grant leave under s 500(2).
I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 2 September 2011
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