Novasonic Corporation Pty Ltd v Hagemeyer (Australasia) BV

[1983] FCA 306

Re: NOVASONIC CORPORATION PTY. LIMITED
And: HAGEMEYER (AUSTRALASIA) B.V.
No. G4 of 1983

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.

HEARING

SYDNEY

#DATE 27:10:1983

ORDER

1. That the order made by the Court on 26 August 1983 restraining the respondent until further order from seeking to be substituted as the plaintiff in action No. 3900 of 1982 in the Supreme Court of New South Wales Equity Division or otherwise proceeding further with such action be terminated. 2. The applicant be released from its undertaking given to the Court on 26 August 1983 that it will not make any application to the Supreme Court of New South Wales Equity Division in action No. 3900 of 1982 Equity Division without seven days prior notice of its intention to make such an application having been given in writing to the respondent. 3. The costs of the application to terminate the injunction granted on 26 August 1983 be the respondent's costs in the proceedings in this Court No. G4 of 1983.

JUDGE1

On 26 August 1983 the Court granted interlocutory injunctions restraining the respondent, Hagemeyer (Australasia) B.V., until further order from seeking to be substituted as plaintiff in action No. 3900 of 1982 in the Supreme Court of New South Wales Equity Division, or otherwise proceeding further with such action. Liberty was given to each party to restore the matter to the list on two days notice. An undertaking was given to the Court by the applicant, by its counsel, that it would not make any application to the Supreme Court in action No. 3900 of 1982 without seven days prior notice of its intention to make such application having been given in writing to the respondent.

The respondent has restored the matter to the list and now seeks an order that the injunction be terminated.

Most of the relevant facts are set forth in my earlier reasons for judgment, so I need not repeat them. The earlier application proceeded before me on the basis of an application for urgent relief of an interim nature pursuant to sub-s. 78B(5) of the Judiciary Act 1903 because the requisite notices had not been given to the Attorney-General of the Commonwealth and the Attorney-General of the State of New South Wales pursuant to s. 78B.

The principal submission of counsel for the applicant in the earlier hearing was that jurisdiction is conferred on this Court exclusive of the Supreme Court with respect, not only to the claim for damages under s. 82 of the Trade Practices Act, which admittedly is exclusively within this Court's jurisdiction, but also to the winding up action in the Supreme Court. I said:

"Reference was made to various cases, including the judgment of the High Court in Fencott v. Muller 57 A.L.J.R. 317 and Stack v. Coast Securities (No. 9) Pty. Limited a judgment of another Judge of this Court delivered on 23 March 1983. Stack's case has been removed to the High Court pursuant to s. 40 of the Judiciary Act. I am informed that argument has concluded before the High Court and that judgment is reserved. It was not disputed by the parties that the judgment of the High Court in Stack's case will probably determine one way or another the correctness of the submission that this Court has exclusive jurisdiction to hear and determine, not only the s. 82 claim, but also the winding up action in the Supreme Court. In these circumstances the motion proceeded before me on the basis of an application for urgent relief of an interim nature pursuant to sub-s. 78B(5) of the Judiciary Act. It was agreed that directions should be given to the applicant to give the necessary notices to the Attorneys-General of the Commonwealth and New South Wales pursuant to that section. It is plain that the argument as to this Court having exclusive jurisdiction to hear the damages claim under s. 82 and the winding up action in the Supreme Court is fairly open. When the High Court gives its judgment in Stack's case the fate of that argument will probably be known. If it is a correct argument the applicant's case for an order restraining the respondent from proceeding further with the Supreme Court action must be strong indeed. In my view this consideration supports the application for the order sought in the motion, at least until the High Court judgment in Stack's case is known."

Later I said:

"As the s. 82 claim can be determined only by this Court it seems to me that the interests of justice point strongly to restraining the respondent from proceeding further in the Supreme Court action at least until the result of Stack's case is known."

Stack's case (I use this description for convenience, but it refers both to Stack v. Coast Securities (No. 9) Pty. Limited and Bargal Pty. Limited v. Force) was decided by the High Court on 12 October 1983, after my earlier judgment in this matter and after the hearing of the application to terminate the interlocutory injunction. I subsequently invited counsel to make any further submissions about the effect of Stack's case on this application, but they told me that no further submissions were necessary, in their view. Although it was not disputed before me at the earlier hearing that the judgment of the High Court in Stack's case would probably determine one way or another the correctness of the principal submission of counsel for the applicant, that assumption was strongly challenged by counsel for the respondent when the matter came before me to terminate the interlocutory injunction. The argument, in summary, was that at its highest for the applicant Stack's case would only support a finding that this Court has exclusive jurisdiction to determine the question whether the applicant is indebted to the respondent in the amount in dispute namely, approximately $100,000. The respondent claims that the applicant owes it something in the order of $270,000 - $284,000. The applicant concedes that it owes the respondent $184,000 but disputes its liability for the balance. Counsel for the respondent submitted that on no view could this Court itself order either that the applicant be wound up or that the Supreme Court of New South Wales should make that order. The judgment of the High Court in Stack's case is not authority for the proposition that the Court has exclusive jurisdiction to determine the non-federal aspect of the controversy between the parties namely, the question of the indebtedness of the applicant to the respondent. Still less does it support the view that this Court has jurisdiction to wind up the applicant. "The Court" under the Companies (New South Wales) Code means the Supreme Court of New South Wales. This definition is not sufficiently tractable to be read as including the Federal Court. Also it must be remembered that the Companies (New South Wales) Code is part of the Commonwealth/State scheme for the regulation of companies and the securities industry. It is a scheme which came into operation following extensive discussions between the Commonwealth and the States where the States have a recognised role to perform with respect, amongst other things, to the winding up of companies through their Supreme Courts. It would be antithetic to the principles inherent in the Commonwealth/State scheme that this Court could itself direct that a company be wound up under the provisions of the Companies (New South Wales) Code. I referred to the Commonwealth/State scheme for the regulation of companies and the securities industry in some detail in my judgment in the News Corporation & Ors. v. National Companies and Securities Commission judgment given 3 June 1983 and need not repeat what I said there.

Even if this Court could determine the nature and extent of the indebtedness of the applicant to the respondent on its running account, which is the foundation of the respondent's right to seek an order winding up the applicant in the Supreme Court, it does not follow that this Court can put an end to that dispute between the parties by ordering the winding up of the applicant. That can be done only by the Supreme Court of New South Wales.

The advantage of allowing the injunction to continue is that it would enable the parties to have determined in the one Court this Court) both the applicant's claim for damages under s. 82 of the Trade Practices Act, which this Court alone has jurisdiction to hear, and the question of the extent of the indebtedness of the applicant to the respondent on the former running account between them. The applicant concedes that it owes the respondent on that account $184,000, the dispute being as to the balance of about $100,000. But this dispute is not properly raised by the pleadings in their present form. The amended statement of claim in the s. 82 proceedings alleges as follows in paras. 19 to 22 inclusive:

"19. At the time of such refusal to deal and/or refusal to supply there was an amount otherwise payable pursuant to the running account referred to in paragraph 7A of the Statement of Claim.

20. The Respondent claims that such amount was, and is, $274,247.51 and, claiming to be a creditor in that amount, seeks to be substituted as plaintiff in Proceedings No. 3900 of 1982 in the Equity Division of the Supreme Court of New South Wales for the winding up of the Applicant herein.

21. The Applicant alleges that the amount otherwise payable pursuant to the said running account is the sum of $184,000.00.

22. In the premises the Applicant is entitled to set off against whatever sum is otherwise payable pursuant to the said running account the amount found by this Honourable Court to be the damage sustained by the Applicant pursuant to paragraph 18 of the Statement of Claim."

The applicant claims in its amended statement of claim, in addition to an order for damages under s.82, "a declaration as to the amount which after any applicable set-off is payable by the respondent to the applicant or by the applicant to the respondent."

Counsel for the applicant in effect conceded before me in argument that the amended statement of claim does not properly raise the question of the extent of the indebtedness of the applicant to the respondent and that a further amendment to the statement of claim would be necessary to raise the true issues between the parties. I will, however, approach the matter before me on the assumption that the applicant will put its pleadings in order and raise the issue of the extent of its indebtedness on the former running account between the parties.

A critical matter is that the Supreme Court action is not simply a proceeding inter parties brought by the respondent against the applicant to recover the amount said to be due of about $284,000. They are proceedings to wind up the applicant. Much of the history of those proceedings was referred to in my earlier reasons but it has been brought up to date in evidence before me on the application to terminate the injunction. It now appears that, not only has the original plaintiff in the Supreme Court action (Mayne Nickless Limited which claimed to be owed $43,423.62) ceased to be a party, but a company, Marantz Australia Pty. Limited, appeared as a supporting creditor claiming a debt from the applicant of $12,590. That company was substituted as plaintiff for Mayne Nickless Limited on 19 September 1983. John Fairfax & Sons Limited has also appeared as a creditor claiming a debt of some $31,000. It appears too that the Commissioner of Taxation is owed money in respect of unpaid sales tax. This illustrates the obvious point that winding up proceedings are in rem.

Counsel for the applicant submitted that, if the injunction is terminated, the Supreme Court may examine the applicant's claim under s. 82 in this Court and that this is unacceptable. I do not accede to that submission. Plainly the only Court that can determine the applicant's claim under s. 82 is this Court, but the Supreme Court, when hearing a proceeding to wind up the applicant, may decide to examine the applicant's s. 82 claim sufficiently to determine whether it is bona fide or whether there is a serious question to be tried and generally in the exercise of its discretion in deciding whether to wind up the applicant. But ultimately the applicant may pursue its rights under s. 82 in this Court. Indeed, even if the applicant is wound up the liquidator may continue the claim.

This Court cannot resolve the entire controversy between the parties. If it could do so then the following words of Mason, Brennan and Deane JJ. in Stack's case (at pp. 30-31) would be in point:-

"The first and paramount consideration in the exercise of this discretion is to do what is best in the interests of the litigants. In this respect the Federal Court can resolve the entire controversy; the Supreme Court cannot do so because the second limb of s. 86 of the Act stands in its way. The court which can resolve the entire controversy has an obvious advantage. Generally speaking, its determination of all the issues will be made more effectively and more expeditiously and at less expense than the resolution of the controversy which depends on determinations made by two courts in separate proceedings in which the issues are necessarily fragmented.

To offset this advantage offered by the Federal Court powerful countervailing reasons need to be shown. For example, it may appear that the federal issue is raised at such a late stage in the Supreme Court proceedings that it would be a waste of time and lead to needless expense and inconvenience not to proceed to a hearing in that Court. Or it may appear that the federal issue is so insubstantial or removed from the non-federal issues that the Supreme Court should proceed with the determination of those issues. It may even appear that the federal issue is but one of many issues making up the entire controversy and that it is indistinguishable from one of the non-federal issues in the sense that the resolution of one necessarily leads to a resolution of the other. In such a case there will be stronger ground for allowing the action to proceed in the Supreme Court."

Assuming that the statement of claim is amended to raise the issue of the indebtedness of the applicant to the respondent, this Court could then determine that question as well as the claim for damages under s. 82, but the winding up of the applicant must be a question that remains with the Supreme Court. I realise that if this Court were to determine the question of the indebtedness of the applicant to the respondent it would in effect thereby determine the right of the respondent to be substituted as plaintiff in the winding-up action, but that action involves creditors generally, the status of the applicant and the question of the applicant's solvency.

In all the circumstances I propose to terminate the injunction.

The orders of the Court are:-

1. That the order made by the Court on 26 August 1983 restraining the respondent until further order from seeking to be substituted as the plaintiff in action No. 3900 of 1982 in the Supreme Court of New South Wales Equity Division or otherwise proceeding further with such action be terminated.

2. The applicant be released from its undertaking given to the Court on 26 August 1983 that it will not make any application to the Supreme Court of New South Wales Equity Division in action No. 3900 of 1982 Equity Division without seven days prior notice of its intention to make such an application having been given in writing to the respondent.

3. The costs of the application to terminate the injunction granted on 26 August 1983 be the respondent's costs in the proceedings in this Court No. G4 of 1983.