MG Constructions Pty Ltd v Radroc Pty Ltd (No 2)
[2023] FCA 105
•16 February 2023
FEDERAL COURT OF AUSTRALIA
MG Constructions Pty Ltd v Radroc Pty Ltd (No 2) [2023] FCA 105
File number: WAD 274 of 2008 Judgment of: BANKS-SMITH J Date of judgment: 16 February 2023 Catchwords: PRACTICE AND PROCEDURE - funds paid into solicitors' trust account in 2013 - funds paid for purpose of share acquisition that has not proceeded - one party deregistered - other party failing to provide any useful response as to treatment of funds - application by solicitors for orders facilitating payment into Court and determination as to disbursement - orders for payment into Court made including ancillary orders Legislation: Federal Court Rules 2011 (Cth) r 14.11, Division 2.5 Cases cited: MG Constructions Pty Ltd v RadrocPty Ltd [2013] FCA 519 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 16 Date of hearing: 16 February 2023 Counsel for the Plaintiff: The Plaintiff did not appear Counsel for the Defendant: The Defendant did not appear Counsel for the Interested Party: Ms JM Sheppard Solicitor for the Interested Party: Jackson McDonald ORDERS
WAD 274 of 2008 BETWEEN: MG CONSTRUCTIONS PTY LTD
Plaintiff
AND: RADROC PTY LTD
Defendant
JACKSON MCDONALD
Interested Party
ORDER MADE BY:
BANKS-SMITH J
DATE OF ORDER:
16 FEBRUARY 2023
THE COURT ORDERS THAT:
1.The funds paid to Jackson McDonald pursuant to orders of the Court made 18 March 2013 and held on trust in a controlled money account, together with accrued interest thereon but less Jackson McDonald's costs fixed at $2,900, be paid into Court and be paid into the Litigants' Fund under Division 2.5 of the Federal Court Rules2011 (Cth).
2.Within 28 days each of the Australian Securities and Investments Commission (ASIC), Jackson McDonald and Radroc are to provide a written submission to the registrar of this Court, not exceeding five pages, stating their position as to how the funds paid into Court should be distributed.
3.Jackson McDonald is to provide a copy of these orders and reasons to Radroc (by registered post to its registered office) and to ASIC forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BANKS-SMITH J:
The plaintiff, MG Constructions Pty Ltd, issued proceedings against the defendant, Radroc Pty Ltd in 2008 alleging, amongst other things, the oppressive conduct of the affairs of Radroc.
MG Constructions held shares in Radroc (Shares). In March 2009 the Court made orders relevantly to the effect that Radroc (or a shareholder of Radroc or its nominee) purchase the Shares under a buy-back proposal and that expert evidence be obtained to assist with determination of the acquisition price.
The orders provided for Radroc to pay the acquisition price to MG Constructions one day after the relevant share buy-back proposal was approved by Radroc's shareholders, or after the exercise of an option (as described in the orders), or by 31 May 2009, whichever date was the earlier.
In March 2013 those orders were varied to provide that Radroc, having exercised the option, would procure an entity known as Danehill Nominees Pty Ltd to purchase the Shares for $4,920 per share, a total of $49,200, with that sum to be paid by Radroc into the trust account of the law firm Jackson McDonald pending agreement or taxation of costs in the proceedings and the payment of such costs by Jackson McDonald to Radroc by way of set off against the purchase price, with any balance to be paid to MG Constructions: MG Constructions Pty Ltd v RadrocPty Ltd [2013] FCA 519 (Gilmour J). It is apparent from the reasons that the Court considered that Radroc had been substantially successful in its defence: at [7].
Danehill executed a share transfer on around 13 May 2013 but the transfer was not executed by MG Constructions.
On 28 October 2013 Radroc transferred $49,200 to Jackson McDonald's trust account.
On 30 October 2016 MG Constructions was deregistered. It follows that Part 5A.1 of Chapter 5A of the Corporations Act 2001 (Cth) (Deregistration, and transfer of registration) applies to it. It also follows that the appropriate party for the purpose of communications relating to MG Constructions is now the Australian Securities and Investments Commission (ASIC).
As matters presently stand, some 10 years since the payment of the funds, MG Constructions has not been reinstated, the share transfer has not been completed, there has been no agreement or taxation of costs and the trust funds remain in Jackson McDonald's trust account (a controlled money account).
Jackson McDonald has brought this application as an interested party in effect inviting the Court to determine what should happen with the trust funds, whether by payment into Court or otherwise. It relied on two affidavits of Daniel Butler, the First Affidavit filed 13 January 2023 and the Second Affidavit filed on the morning of this hearing.
Based on the First Affidavit, it is apparent that Jackson McDonald has been unsuccessful in obtaining proper instructions from its former client as to what is to happen with the funds. At most, there is a record of a telephone conversation where it appears that the representative of Radroc was content that the status quo be maintained. According to the Second Affidavit, Radroc has been served with notice of this application. It has not appeared.
Based on the Second Affidavit, Mr Butler has been in correspondence with ASIC about this application and it has indicated that it will take a neutral stance and will abide any order of the Court. It has indicated that it has no knowledge of the matter and holds no books or records of MG Constructions.
Such circumstances pose a procedural conundrum. Ordinarily where more than one party claims an entitlement to a fund held by a third party and the third party is at risk of being sued regardless of the course it might follow, the matter should be resolved by interpleader proceedings. In the present case no party seeks to claim the fund or assist with any proposal for the disbursement of the fund, and it is not appropriate that Jackson McDonald continue to hold the fund on trust with concomitant responsibilities and costs.
Although at first blush it may appear inapposite, I consider that the text of r 14.11(1) of the Federal Court Rules 2011 (Cth) (preservation of property) is sufficiently broad to empower me to make an order for payment of the funds into Court. Therefore, I consider that the appropriate course is that the funds held on trust, together with accrued interest thereon but less Jackson McDonald's costs of this application fixed at $2,900 (an amount evidenced by an invoice and with an additional small amount for exigencies), be paid into Court and be paid into the Litigants' Fund under Division 2.5 of the Federal Court Rules. A registrar of this Court may seek information about claims to the money, take action as appropriate with respect to it, determine the manner in which it should be distributed and give notice to the parties about such determination.
However, I am not willing to order only that the money be paid into Court. There should also be programming orders to assist the registrar and to progress the matter. Therefore, I will also direct that each of ASIC, Jackson McDonald and Radroc are to provide a written submission to the registrar, not exceeding five pages, stating their position as to how the funds should be distributed. That course should be undertaken within 28 days. It will then be for the registrar to proceed as they consider appropriate.
Further, Jackson McDonald should provide a copy of these orders and reasons to Radroc (by registered post to its registered office) and to ASIC forthwith.
There will be orders accordingly.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith. Associate:
Dated: 16 February 2023
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