Sharp (Trustee) v Sheahan (Liquidator)
[2012] FCA 325
•2 February 2012
FEDERAL COURT OF AUSTRALIA
Sharp (Trustee) v Sheahan (Liquidator); In the matter of Cedenco JV Australia Pty Ltd (In Liq) [2012] FCA 325
Citation: Sharp (Trustee) v Sheahan (Liquidator); In the matter of Cedenco JV Australia Pty Ltd (In Liq) ACN 075 836 010 [2012] FCA 325 Parties: BRADLEY D SHARP AS TRUSTEE IN BANKRUPTCY OF SK FOODS L. P, A CALIFORNIA LIMITED PARTNERSHIP (UNDER CHAPTER 11) v JOHN SHEAHAN AND IAN RUSSELL LOCK AS LIQUIDATORS OF CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 075 836 010 and CARY S COLLINS, A RESIDENT OF CALIFORNIA, UNITED STATES OF AMERICA File number: NSD 1068 of 2011 Judge: RARES J Date of judgment: 2 February 2012 Date of hearing: 2 February 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 12 Counsel for the Plaintiff: Mr G Lucarelli Solicitor for the Plaintiff: Duncan Cotterill Counsel for the Defendant: Mr D R Sulan Solicitor for the Defendant: DMAW Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1068 of 2011
IN THE MATTER OF CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 075 836 010)
BETWEEN: BRADLEY D SHARP AS TRUSTEE IN BANKRUPTCY OF SK FOODS L. P, A CALIFORNIA LIMITED PARTNERSHIP (UNDER CHAPTER 11)
PlaintiffAND: JOHN SHEAHAN AND IAN RUSSELL LOCK AS LIQUIDATORS OF CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 075 836 010
First DefendantCARY S COLLINS, A RESIDENT OF CALIFORNIA, UNITED STATES OF AMERICA
Second Defendant
JUDGE:
RARES J
DATE OF ORDER:
2 FEBRUARY 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The second defendant do each of the following on or before 9 February 2012:
(a)file and serve an address for service in accordance with the Federal Court Rules 2011 (Cth);
(b) file and serve his reply;
(c) file and serve a statement of the issues for trial;
(d) file and serve an affidavit explaining his failure to appear on 2 February 2012.
2.Upon default in compliance with any of orders 1(a)–(d) inclusive the following orders will come immediately into effect on 10 February 2012:
(a)The second defendant’s points of claim filed on 9 December 2011 be struck out.
(b)The decision by the first defendants to admit the second defendant’s proof of debt dated 18 May 2011 for USD$ 418,339.67 be wholly reversed.
(c)The second defendant’s proof of debt dated 18 May 2011 for USD$418,339.67 be wholly rejected.
(d)The second defendant pay the plaintiff’s and first defendant’s costs of the proceedings, with such costs to be assessed on an indemnity basis.
(e)The first defendants be released from their undertaking to the Court given on 27 July 2011.
(f)The plaintiff be released from his undertaking as to damages proffered to the Court on 27 July 2011.
(g)The security for costs of $50,000 paid into Court by the plaintiff be released to the plaintiff, with all accrued interest.
(h) Order 1 made on 2 December 2011 be vacated.
3.On or before 9 February 2012 the second defendant answer the notice to produce served by the solicitors for the plaintiff on the solicitors for the second defendant by letter dated 19 December 2011.
4.The second defendant’s interlocutory application filed on 29 November 2011 be dismissed and the second defendant pay the plaintiff’s costs of that interlocutory application, with such costs to be assessed on an indemnity basis.
5.The plaintiff serve a copy of these orders on the second defendant by email today to the following addresses: [email protected] and [email protected] and by facsimile transmission to each facsimile number for the second defendant of which the plaintiff is aware.
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 1068 of 2011
IN THE MATTER OF CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 075 836 010)
BETWEEN: BRADLEY D SHARP AS TRUSTEE IN BANKRUPTCY OF SK FOODS L. P, A CALIFORNIA LIMITED PARTNERSHIP (UNDER CHAPTER 11)
PlaintiffAND: JOHN SHEAHAN AND IAN RUSSELL LOCK AS LIQUIDATORS OF CEDENCO JV AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 075 836 010
First DefendantCARY S COLLINS, A RESIDENT OF CALIFORNIA, UNITED STATES OF AMERICA
Second Defendant
JUDGE:
RARES J
DATE:
2 FEBRUARY 2012
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)
The plaintiff has brought these proceedings to challenge the admission of the proof of debt lodged by Cary Collins, the second respondent, in the liquidation of Cedenco JV Australia Pty Limited whose interests are represented by its liquidators as first respondents. The proceedings have had a number of interlocutory hearings before me in which several contentious issues have been debated.
On 2 December 2011, I made orders fixing the proceedings for hearing on 19 March 2012 and providing for a timetable that was calculated to enable the issues for trial to be identified by the filing of points of claim by Mr Collins, as the party seeking to uphold his entitlement to prove in the liquidation, points of defence by the plaintiff seeking to maintain his objection to that claim and points of reply by Mr Collins. The parties complied with my directions that Mr Collins file his points of claim by 9 December 2011 and the plaintiff file his defence to the points of claim by 19 December 2011.
However, in an affidavit filed by Mr Collins’ former solicitor, Paul Sarvaas, on 30 January 2012, Mr Sarvaas said that he had served a notice of intention to cease to act in the proceedings on Mr Collins on 12 January 2012 in accordance with r4.05(1)(a) and Form 7 of the Federal Court Rules 2011 (Cth). The notice of intention to cease to act informed Mr Collins that after seven days from its service, namely 19 January 2012, Mr Sarvaas would file in the Registry a notice that he had ceased to act. It also informed Mr Collins that he had five days, after the filing of the latter notice, to file in the Registry a notice of address for service. The notice of ceasing to act and Mr Sarvaas’ supporting affidavit were only filed on 30 January 2012.
I had listed the proceedings for directions today specifically for the parties to identify the issues for trial. I had also adjourned Mr Collins’ part heard interlocutory application, filed on 20 November 2011 to today. One of the reasons I ordered that the points of claim, defence and reply be filed was in order to enable the interlocutory application to be dealt with today.
Notwithstanding the evidence that Mr Sarvaas informed Mr Collins on 12 January 2012 of his intention to cease to act, Mr Collins does not appear to have taken any particular steps to comply with his outstanding obligation to file and serve his reply on or before 20 January 2012.
In addition, on 19 December 2012 the solicitors for the plaintiff served on Mr Collins’ solicitors a notice to produce a number of documents that had been the subject of previous discussion when the matter was before me on 2 December 2011. No documents had been produced by 24 January 2012. On that day the plaintiff’s solicitors again wrote to Mr Sarvaas, being then unaware that he had ceased, or proposed to cease, to act, complaining of his client’s failure to comply with the notice to produce in accordance with the Rules.
At 9.07 pm last night, an emailed letter was sent to my associate, by a Neil Alexander, who gave an address in Bondi Junction stating that Mr Alexander was a friend of Mr Collins. The letter asserted that Mr Collins was an American citizen and a resident of San Francisco and that Mr Sarvaas’ notice of ceasing to act had been filed on 30 January 2012. The letter noted Mr Collins had been informed of today’s directions hearing. It stated that Mr Alexander had been asked to notify the Court that Mr Collins wanted to be heard in the proceedings and he sought an adjournment of 21 days to enable him to engage new solicitors or to re-engage Mr Sarvaas. Mr Alexander said that he was able to communicate with Mr Collins and sought information about any Court orders concerning the proceedings.
It is clear, on the evidence before me, that Mr Collins has known since at least 12 January 2012 that he would have difficulties in securing the attendance of Mr Sarvaas today. He has had ample time to seek alternate representation. And, apart from the very late communication by Mr Alexander, Mr Collins does not appear to have done anything to be in a position to deal with the proceedings and his outstanding interlocutory application that had been adjourned to today. On the material presently before me, Mr Collins has taken no steps to comply with the orders for his reply to be filed and the issues for trial to be identified today.
The plaintiff has asked that I exercise my powers under r 5.23 and, in substance, make a springing order that if Mr Collins fails to comply with the outstanding obligations he has under the existing orders within five days, his proof of debt be disallowed in its entirety, his points of claim be struck out, the plaintiff have the benefit of the return of the funds that he has paid into Court and the proceedings be effectively brought to a close.
In my opinion, that is an appropriate outcome. I am satisfied that Mr Collins has had ample time in which to engage solicitors to appear today or, alternatively, to appear before the Court in person, notwithstanding that he is resident in the United States of America. Having regard to the contentions that he has made in his points of claim, Mr Collins does not appear to have had any past difficulty either in travelling or spending considerable sums of money in doing so. The proceedings have been listed for two months to take place today in order that I can properly manage the outstanding issues so that the trial, fixed for hearing on 19 March 2012, can proceed in an orderly way. It seems to me that at the very least Mr Collins’ interlocutory application, filed on 20 November 2011, must be dismissed with costs on a complete indemnity basis and that the other orders which the plaintiff seeks should be made.
Because of the failure of Mr Collins or Mr Alexander to communicate with either of the other parties prior to today as to Mr Collins’ position, the liquidators have been unable to provide instructions to their counsel, who has appeared, as to what orders they would seek to protect their position. However, it seems to me that because Mr Collins is in default he ought bear, on a complete indemnity basis, the costs of today which have been entirely wasted so far as concerns the other parties and the Court. The estate administered by the liquidators should be entitled to recover from Mr Collins the costs that have been wasted as a result of today and the liquidators should be entitled to make an application for such other relief as they may seek when they have had a chance to consider their position.
The failure of Mr Collins to provide any explanation to the Court of his failure to take steps since Mr Sarvaas informed him on 12 January 2012 that he intended to cease to act is a matter of considerable concern given the pendency of the hearing date in particular. These are complex proceedings and they involve serious allegations by the plaintiff in respect of Mr Collins’ conduct. In my opinion, Mr Collins’ defaults in complying with the Court’s orders for filing and serving his reply, appearing today at the directions hearing and identifying the issues for trial, prosecuting his interlocutory application filed on 29 November 2011 and failing to answer the notice to produce, warrant that I make orders of the kind sought by the plaintiff.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 2 April 2012
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