Parkard Computers Pty Ltd v Flexible Manufacturing Systems Pty Ltd

[1997] FCA 291

NOT SUITABLE FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA     )
  )
NEW SOUTH WALES DISTRICT REGISTRY     )          No. G3731 of  1996
  )
GENERAL DIVISION  )

BETWEEN:               PARKARD COMPUTERS PTY   LIMITED

Applicant

AND:              FLEXIBLE MANUFACTURING      SYSTEMS PTY LIMITED (RECEIVER   AND MANAGER APPOINTED)

Respondent

CORAM:       Burchett J
PLACE:         Sydney
DATE:           23 April 1997

MINUTE OF ORDER OF THE COURT

THE COURT ORDERS THAT:

The respondent’s motion seeking a prompt hearing of the application separate from the hearing of the other issues between the parties be dismissed with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA     )
  )
NEW SOUTH WALES DISTRICT REGISTRY     )          No. G3731 of  1996
  )
GENERAL DIVISION  )

BETWEEN:               PARKARD COMPUTERS PTY   LIMITED

Applicant

AND:              FLEXIBLE MANUFACTURING      SYSTEMS PTY LIMITED (RECEIVER   AND MANAGER APPOINTED)

Respondent

CORAM:       Burchett J
PLACE:         Sydney
DATE:           23 April 1997

REASONS FOR JUDGMENT

BURCHETT J:

This is a motion seeking an order for the prompt hearing, separately from and in advance of the hearing of a plethora of other disputes involving the parties, of an application under s.459G of the Corporations Law. 

The circumstances are unusual.  Court proceedings over the disputes go back to 10 December 1991, when action number G3178 of 1991 was commenced in the court between parties  initially including the applicant Parkard Computers Pty Limited and subsequently (by motion for joinder of an additional party) the respondent Flexible Manufacturing Systems Pty Limited.  Over a lengthy period, the action was adjourned from time to time to permit Flexible Manufacturing Systems Pty Limited to proceed

unhampered with litigation in California. That litigation was eventually concluded last year, after an appeal, in the company’s favour, when it became entitled to well over US$2,000,000. The company then made a call dated 20 September 1996, through its receiver and manager, on approximately 90,000 partly paid shares held by the applicant, and on 22 October 1996 it issued a Creditor’s Statutory Demand for Payment of Debt in respect of that call. The immediate response was action number G3718 of 1996 brought by the applicant and its director Barry Charles Amor against Flexible Manufacturing Systems Pty Limited, two other companies and Royce Bruce Ritchie, claiming relief under ss. 260 and 461 of the Corporations Law, and the bringing of the application under s.459G with which I am concerned followed on 4 November 1996.

In urging me to order that the proceeding under s. 459G proceed to an immediate hearing, Mr Bennett QC relies on two main points: the proposition that such an application, of its nature, should be heard promptly; and a contention that the applicant’s own affidavits did not raise a reasonably arguable answer to the call on the partly paid shares. I accept the first proposition as a general rule from which there would be few exceptions. However, in the present case, the very creation of the alleged debt by the making of the call is inescapably bound up with the wider dispute between the parties. The call was made by a company which is under the control of one of the sets of warring parties, and that control is at the centre of their disputes. A major issue in the litigation is whether the applicant is a shareholder suffering oppression from those in control of the company. If, at the ultimate hearing, the applicant proves its case, the making of the call may be shown to have been a deliberate step forming part of the oppression for which the applicant will be found entitled to relief. In those circumstances, while fully accepting the general rule relied on, I do not think it would be just to apply it here. After all, an oppression suit raises the very question whether the exercise of legal rights should be subjected to equitable considerations: Re Lowes Park Pty Ltd; Headlam v Lowes Park Pty Ltd (1994) 62 FCR 535 at 548-549.

Since the case has received nothing like a full hearing, I will not in these reasons examine at any length the evidence relevant to counsel’s other argument.  I should add that any views I have about the facts of this matter are entirely tentative and involve no final conclusions whatever.  But I do not accede to the proposition, even apart from the wider context just discussed, that no bona fide defence to the debt that allegedly arose on the call has been shown.  On the contrary, there is evidence of an arrangement made between directors, and apparently approved or at least not vetoed by the company’s auditors, reflected in a note in the annual accounts, pursuant to which it may be held that payment was effected in kind in respect of the unpaid proportion of the shares.  But, in any case, my conclusion on the first point means that it is not appropriate to proceed to hear issues arising out of the call in isolation from the fundamental issues underlying the ability of Flexible Manufacturing Systems Pty Limited to make that call, and the circumstances in which it did so. 

Accordingly, the motion for a prompt separate hearing is dismissed with costs.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

Associate:

Date:    23 April 1997