Kendell v Solomons (Liquidator)
[2015] FCA 164
•3 March 2015
FEDERAL COURT OF AUSTRALIA
Kendell v Solomons (Liquidator); In the Matter of ACN 154 582 288 (formerly E-tivity Corporation (APAC) Pty Limited) (In Liq) [2015] FCA 164
Citation: Kendell v Solomons (Liquidator); In the Matter of ACN 154 582 288 (formerly E-tivity Corporation (APAC) Pty Limited) (In Liq) [2015] FCA 164 Parties: DAVID WARD KENDELL v DAVID SOLOMONS AND RIAD TAYEH, JOINT AND SEVERAL LIQUIDATORS OF ACN 154 582 288 (FORMERLY E-TIVITY CORPORATION (APAC) PTY LIMITED) (ACN 154 582 288) (IN LIQUIDATION); IN THE MATTER OF ACN 154 582 288 (FORMERLY E-TIVITY CORPORATION (APAC) PTY LIMITED) (ACN 154 582 288) (IN LIQUIDATION) File number: NSD 1338 of 2014 Judge: FOSTER J Date of judgment: 3 March 2015 Legislation: Corporations Act 2001 (Cth), s 531 Date of hearing: 3 March 2015 Place: Sydney Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 19 Counsel for the Plaintiff: The Plaintiff appeared in person Counsel for the Defendants: Mr S Golledge Solicitor for the Defendants: PLN Australia Pty Ltd
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1338 of 2014
IN THE MATTER OF ACN 154 582 288 (FORMERLY E-TIVITY CORPORATION (APAC) PTY LIMITED) (ACN 154 582 288) (IN LIQUIDATION)
BETWEEN: DAVID WARD KENDELL
PlaintiffAND: DAVID SOLOMONS AND RIAD TAYEH, JOINT AND SEVERAL LIQUIDATORS OF ACN 154 582 288 (FORMERLY E-TIVITY CORPORATION (APAC) PTY LIMITED) (ACN 154 582 288 ) (IN LIQUIDATION)
Defendants
JUDGE:
FOSTER J
DATE OF ORDER:
3 MARCH 2015
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Leave be granted to the plaintiff to amend his Originating Application in accordance with the Amended Originating Application handed up in Court this day (3 March 2015), initialled by Foster J and dated today, such Amended Originating Application to be filed electronically by 4 March 2015.
2.Service of the said Amended Originating Application be dispensed with.
3.By 4 March 2015, the defendants provide to the plaintiff a copy of the Written Advice or Written Opinion dated 18 November 2014 obtained by them from Mr RM Smith SC.
4.By 6 March 2015, the defendants provide to the plaintiff a copy of such documents as are in their possession, custody, control or power falling within paragraphs D (1) to (6) of the plaintiff’s Amended Originating Application.
5.The defendants file electronically the exhibits to the affidavit of Troy Graham sworn on 18 February 2015.
6.The plaintiff’s claims for relief made in the said Amended Originating Application otherwise be dismissed.
7.There be no orders as to the costs of this proceeding.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1338 of 2014
IN THE MATTER OF ACN 154 582 288 (FORMERLY E-TIVITY CORPORATION (APAC) PTY LIMITED) (ACN 154 582 288) (IN LIQUIDATION)
BETWEEN: DAVID WARD KENDELL
PlaintiffAND: DAVID SOLOMONS AND RIAD TAYEH, JOINT AND SEVERAL LIQUIDATORS OF ACN 154 582 288 (FORMERLY E-TIVITY CORPORATION (APAC) PTY LIMITED) (ACN 154 582 288) (IN LIQUIDATION)
Defendants
JUDGE:
FOSTER J
DATE:
3 MARCH 2015
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This proceeding was commenced on 17 December 2014 by the plaintiff, who is a solicitor and also a creditor of the company now called ACN 154 582 288, which was formerly called E-tivity Corporation (APAC) Pty Limited (In Liquidation) (E-tivity). The defendants are the liquidators of E-tivity.
When he commenced this proceeding, the plaintiff claimed an order for the production to him of a written Opinion provided to the liquidators by Mr RM Smith SC dated 18 November 2014, pursuant to s 531 of the Corporations Act 2001 (Cth), and an order for the production to him of seven categories of documents pursuant to s 511 of the Corporations Act.
By an Amended Originating Application dated 6 January 2015, which the plaintiff believed was filed in January 2015 but which according to the records of the Court has not been filed, the plaintiff significantly expanded the classes of documents in respect of which he required compulsory orders for production. The claims for relief and the classes of documents referred to in the plaintiff’s Amended Originating Application are in the following terms:
A.under S531 of the Corporations Act and Regulation 5.6.01 of the Corporations Regulations for directions that the defendants are in breach of S531 of the Act and Regulation 5.6.01 insofar as they refused to produce to the plaintiff for inspection a complete and correct record of the liquidator’s administration of the company’s affairs including all matters as may be necessary to give a complete and correct view of the Liquidators administration of the company’s affairs within the meaning of Regulation 5.6.01
B.under S531 of the Corporations Act and Regulation 5.6.01 of the Corporations Regulations for directions that the defendants produce to the plaintiff for inspection a complete and correct record of the liquidator’s administration of the company’s affairs including all matters as may be necessary to give a complete and correct view of the Liquidators administration of the company’s affairs within the meaning of Regulation 5.6.01 including all.
a. documents, letters, emails, handwritten notes concerning the liquidator’s administration of the company’s affairs.
b. documents, letters, emails, legal opinions concerning the recovery of assets or damages by the company from any person including Mr Jones
c. briefs and communications with Mr Rod Smith SC concerning the recovery of assets or damages by the company from any person including Mr Jones.
d. legal opinions of Mr Rod Smith QC concerning the recovery of assets or damages by the company from any person including Mr Jones
e. records of any investigation of whether Mrs Honey Jones and Mr Kempson were at any material time shadow directors of the company.
f. copy of URL of E-tivity Corporation ( as at 6/7/14 describing Fred Kempson as “Chairman” and Honey Jones as “Director” of the company,
g. reports on changes made to the website of E-tivity Corporation ( from 6/7/14 to 5th September 2014 and in particular the removal of content describing Fred Kempson as “Chairman” and Honey Jones as “Director” of the company,
h. copy of URL records of any investigation into statutory and common law breaches by Mr Jones as a director of the Company, Mrs Honey Jones and Mr Fred Kempson as shadow directors and Mr David Gurney as a person who may have aided and abetted the breaches.
C.that the defendant take all steps necessary to investigate the affairs of the company including any matters raised by Mr Rod Smith SC in his opinion.
D.Under S511 of the Corporations Act for directions that the defendants, provide the Plaintiff and the other creditors with:
1. a Copy of executed Licence Agreement between Philip Arthur Jones, Positive Group Holdings Pty Limited and APAC dated 9th August 2013 (the Licence Agreement).
2. a Copy of any letter of demand from Philip Arthur Jones and Positive Group Holdings Pty Limited to APAC demanding payment of any unpaid royalties under the Licence Agreement between 1st July 2014 and 5th September 2014
3. a Copy of any written document or email purporting to dispose of, assign or terminate the Licence Agreement between 1st July 2014 and 5th September 2014
4. a Copy of any minutes of meetings of the director of APAC concerning the termination of the Licence Agreement between 1st July 2014 and 5th September 2014
5. a Copy of agreement dated 5th September 2014 between APAC and ComOps Limited by which APAC agreed to sell its assets to ComOps.
6. a Copy of the Licence Agreement between Philip Arthur Jones, Positive Group Holdings Pty Limited and ComOps dated on or about 5th September 2014
(“the Transactions”)
7. Any valuation by, notes in respect of meetings, minutes of meetings, working papers, correspondence or emails to or from Michael Wong in respect of the value of APAC’s E-tivity business by Michael Wong provided to APAC in or about August and September 2014.
8. Any valuation by, notes in respect of meetings, minutes of meetings, working papers, correspondence or emails to or from Chris Ong in respect of the value of APAC’s E-tivity business by Chris Ong provided to APAC in or about August and September 2014.
9. Any valuation obtained by you of APAC’s business and assets sold to ComOps.
10. A copy of any notes in respect of meetings, minutes of meetings, correspondence or emails to or from or at which Philip Arthur Jones attended on 25th August 2014 in respect of the pending insolvency of APAC.
I note that the categories of documents specified in paragraph D, sub-paragraphs 1 to 7 of the Amended Originating Application correspond with the seven categories of documents required to be produced to the plaintiff which are specified in paragraph B of the Originating Application as filed.
By seeking and obtaining leave to file his Amended Originating Application, the plaintiff:
(a)Sought production of a raft of additional documents, being those documents specified in paragraph B, subparagraphs (a) to (i), and those documents specified in paragraph C, subparagraphs 8 to 10; and
(b)Made claims for additional relief as specified in paragraphs A and C.
The plaintiff never pressed his claims for relief made in paragraphs A and C of his Amended Originating Application. In addition, he abandoned his claims for production of documents in the categories specified in paragraph B, subparagraphs (b) to (i) and in paragraph C, subparagraphs (7) to (10). Some of these claims for production of documents were abandoned in early February 2015 and some at the door of the Court.
The parties have now resolved all of their differences with the exception of who should bear the costs of this proceeding. In order to deal with that question, it is necessary to say a little more about the background to the proceeding.
On 5 September 2014, the defendants were appointed administrators of E-tivity and subsequently, on 13 October 2014, they were appointed as liquidators of that corporation.
From about September 2014, the plaintiff believed that the former director of E-tivity, a Mr Jones, had orchestrated the termination of a licence agreement which had been entered into by him and by a corporation under his control (Positive Group Holdings Pty Ltd) with E-tivity in respect of certain computer software, in circumstances which constituted a breach of the duties which Mr Jones owed to E-tivity as its director. The plaintiff wanted action taken by the defendants against Mr Jones and his associates in respect of that matter. The defendants informed the plaintiff that they did not have funds to investigate this transaction or Mr Jones’ conduct. It was then agreed between the parties that the plaintiff would fund the defendants to obtain an opinion from an appropriate Senior Counsel as to whether or not the licence agreement to which I have referred was validly terminated and, having regard to Counsel’s opinion in respect of that matter, whether Mr Jones was guilty of breaching the duties owed by him to E-tivity as its director. An Opinion was then obtained from Mr Smith. The plaintiff did, in fact, fund the obtaining of that Opinion but the defendants have declined to show the Opinion to him.
The parties then engaged in a considerable amount of correspondence directed to the plaintiff’s request to see the Opinion of Mr Smith and also to see other documents apparently in the possession of the defendants.
The matter was fixed for hearing this morning.
After the matter proceeded before me for some little time, Counsel appearing for the defendants made an open offer to the effect that his clients would now produce Mr Smith’s Opinion to the plaintiff. The parties had already informed me that such of the documents listed in subparagraphs 1 to 6 of paragraph D of the Amended Originating Application as are in the possession, custody, control or power of the defendants would also be produced to the plaintiff.
After Counsel for the defendants made the open offer to which I have referred, I inquired of the plaintiff whether he wished to press the one remaining claim for production of documents maintained by him, being his claim in respect of the documents described in paragraph B, subparagraph (a) of his Amended Originating Application. His answer to my inquiry was that he wanted his costs. As I understand his current position, he does not now wish to press for the documents described in that subparagraph.
There was then an argument about costs.
The plaintiff submitted that he should have his costs because he has been successful and, as a matter of principle, even though he is a self-represented litigant he is entitled to an order for costs. He emphasised that he was a solicitor. He submitted that there was High Court authority which supported his position, although he did not cite that authority to me.
Counsel for the defendants, on the other hand, submitted that a large number of the plaintiff’s claims had been abandoned, including a significant part of paragraph B in the Amended Originating Application and that that abandonment had been quite recent. In addition, Counsel submitted that the Court would never have required production of the documents specified in most of the subparagraphs in paragraph B in any event. Counsel for the defendants went on to argue that there was no basis upon which any order against the defendants personally would have been made and that, at most, if the Court were minded to make an order for costs, the costs should be ordered to be paid as part of the costs and expenses of the winding up.
It seems to me that the present state of affairs was brought about by the conduct of both sides of this litigation. The defendants behaved unreasonably in not producing Mr Smith’s Advice to the plaintiff but the plaintiff pressed a large number of unsustainable claims for production of documents. Both sides of the record must bear responsibility for the litigation. The disputes between the parties should have been resolved well before today. I think that the appropriate order in respect of costs is that there be no orders as to costs.
I will make orders giving effect to the “agreement” reached between the parties in relation to the production of documents and otherwise dismiss the plaintiff’s claims for relief.
There will be orders accordingly.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate:
Dated: 5 March 2015
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