Southern Oceanic Hotels P/L v Ocean City Ltd (Receiver and Manager Appointed)

[1993] FCA 66

Re: SOUTHERN OCEANIC HOTELS PTY LIMITED
And: OCEAN CITY LIMITED (Receiver and Manager Appointed)
No. WA G15 of 1993
FED No. 66
Number of pages - 7
Corporations

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Corporations - winding up application - appropriate venue - operation of s.48 Federal Court of Australia Act - application commenced in Sydney - applicant and respondent both incorporated in Western Australia - assets only in Western Australia - relevant officer and proposed provisional liquidator in Western Australia - general scope of s.48 - transfer ordered.

Federal Court of Australia Act s.48

HEARING

PERTH, 10 February 1993

#DATE 10:2:1993

Counsel for the Applicant : Mr J. Ley

Solicitors for the Applicant : Freehill Hollingdale and Page

Counsel for the Respondent : Mr J. Chaney

Solicitors for the Respondent: Northmore Hale Davy and Leake

ORDER

The Court orders that:

(1) That the proceedings in action G3017 of 1993 be henceforth continued in the Western Australia district registry and be conducted in Perth.

(2) That there be liberty in action G3017 of 1993 for parties to apply for directions as to the venue for the hearing of any part of the proceedings.

(3) The costs of the application be reserved.

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

JUDGE1

FRENCH J. On 29 January 1993 Ocean City Limited (Receiver and Manager appointed) ("OCL") filed an application in the New South Wales District Registry of the Court seeking an order that Southern Oceanic Hotels Pty Limited ("SOH") be wound up under the Corporations Law. A motion was also filed in these proceedings on 1 February 1993 by OCL seeking an order that Anthony Hayes Douglas-Brown be appointed as provisional liquidator of SOH. The application was supported by an affidavit from David John Coates, a chartered accountant, of Pier Street, Perth, who is the receiver and manager of OCL. Both OCL and SOH have been and, according to Mr Coates' affidavit, "may still be" wholly-owned subsidiaries of Southern Equities Corporation Limited (Scheme Administrators Appointed), ("SECL") formerly known as Bond Corporations Holdings Limited.

1. OCL is the registered proprietor of land at Scarborough in Western Australia on which the Observation City Resort Hotel stands. Mr Coates was appointed by Kumagai Gumi Co. Limited ("KG") as receiver and manager of OCL's assets on 18 November 1992 under an equitable mortgage and a registered land mortgage granted to secure financial accommodation provided by Westpac and KG for the construction of the resort. OCL is said to have purported to lease the hotel complex to SOH in June 1988. Under the lease SOH is said, as at 15 November 1992, to have owed OCL $5,058,909.

2. A written demand for payment of the debt pursuant to s. 460(2)(a) of the Corporations Law is said to have been issued and served on SOH on 8 December 1992. It is alleged in Mr Coates affidavit that the sum demanded has not been paid. He also expresses serious concerns about the manner in which the affairs of SOH are being conducted. In summary, these involve allegations that:
   

(a) SOH may be continuing to trade as operator of a major hotel while insolvent;

(b) that the principal assets of SOH are in jeopardy being subject to a claim by a creditor whose security on its face expressly excludes those assets;

(c) that assets of SOH may have been recently or may be about to be disposed of on less than arms-length terms or otherwise used to support the SEL scheme and the interests of other members of the Bond Group rather than interests of SOH and its creditors; and

(d) that common officers of SOH, OCL and SECL have been and continue to be faced with conflicts of duties.

The application is presently listed for first return before a registrar of this court in Sydney on 12 February. In the ordinary course it would go into the registrar's list but be referred by the registrar to a judge if appropriate. On 5 February 1993, SOH filed a fresh application in the Western Australian District Registry seeking an order that the proceedings and the winding-up application be transferred to the Western Australian District Registry. That application was heard today on affidavit. It was supported by the affidavit of Gary John Trevor, a director of SOH, who made the following points:

(1) he is a director of both SOH and OCL.

(2) SOH is incorporated in Western Australia and all of its assets are located in this state.

(3) the principal assets of SOH are the lease of the hotel complex, the right to manage the hotel and the furniture, chattels and equipment used to conduct the hotel complex's operation.

(4) he is one of the scheme administrators for the scheme of arrangement for SECL and holds his directorships in SOH and OCL by virtue of his capacity as an administrator of the scheme.

(5) the receiver and manager of OCL, Mr Coates, has his offices in Perth and since his appointment he and Mr Trevor have had various discussions and have exchanged correspondence concerning the ownership of the furniture, chattels and equipment of the hotel complex.

(6) the proposed provisional liquidator of SOH, Mr Anthony Douglas-Brown, has his professional offices in Perth.

(7) it is SOH's intention to oppose the winding-up proceedings on grounds, inter alia, that they are an abuse of process and not brought bona fide.

1. In a letter dated 1 February 1993 sent by fax from solicitors acting for OCL's receiver to SOH's solicitors the choice of New South Wales as the venue for the winding-up application was explained thus:
   

"Our client instituted the proceedings in the New South Wales District Registry of the Federal Court primarily because the Applicant is now controlled from Sydney where Kumagai Gumi Co Ltd, the appointer of the Receiver and Manager to the Applicant, is based. In addition, instructions to commence the proceedings were obtained and documents drafted at a time when the Western Australian District Registry was closed."

Affidavits were filed in court today in opposition to SOH's application. The first was sworn by Mr Coates who set out somewhat more elaborate reasons for instructing his solicitors to commence the winding-up proceedings in Sydney as follows:

(a) Prior to his appointment as receiver and manager of the assets of OCL on 18 November his appointer, KG, whose principal place of business is North Sydney in New South Wales had, through its officers in Sydney, been conducting dealings with the directors of SOH and scheme administrators of SECL throughout the latter part of 1991 and 1992. Those persons with whom he had worked closely since his appointment had developed a detailed understanding of the affairs of OCL and its relationship with other subsidiaries of SECL.

(b) In the course of dealings between officers of KG and the directors of SOH and the scheme administrators KG had instructed Corrs Chambers Westgarth in Sydney to provide advice in relation to ongoing matters. The representatives of that firm who had been involved had also developed a detailed knowledge of the matter and he is anxious that they should be in a position to conduct the application for the appointment of a provisional liquidator and for the winding-up of SOH. "To that end it is convenient", he says, "that the proceedings be commenced in Sydney".

(c) There are currently three directors of SOH. All are partners of the firm Ferrier Hodgson and Co. One is resident in and works from Sydney and two are resident in and work from Perth. In the latter part of 1992 there were three additional directors all from Sydney. Those three resigned in late November or December 1992. Two of those directors who retired were Ian Ferrier and Andrew Love, partners in Ferrier Hodgson and Co.

(d) There are two scheme administrators of SECL, Mr Ferrier and Mr Trevor. Mr Ferrier resides in and works from Sydney and Mr Trevor resides in and works from Perth. Both have been actively involved in the administration of the scheme and in dealings with KG.

(e) An ASC company extracts search exhibited to his affidavit in the proceedings in Sydney shows that as at 14 September 1992 of the six directors of OCL, four are partners in Ferrier Hodgson and Co and two of those are resident in and work in Sydney. The two remaining directors reside in Sydney.

(f) One of the issues arising in the applications for the appointment of a provisional liquidator is dealings between SOH and Quality Pacific Corporation Limited. Representatives of KG and their legal advisers have had meetings and discussions in Sydney with representatives of Quality Pacific Corporation Limited based in Sydney concerning management of the Observation City Resort Hotel.

(g) On the basis of the foregoing considerations he considered it was convenient and cost-efficient for the matter to be dealt with by application made in Sydney.

Mr Coates said that he was also advised by his solicitors that the evidence in the application for the appointment of a provisional liquidator and for winding up will be by affidavit and oral evidence is only likely in the event that there is cross-examination on the affidavits. OCL, he says, has no objection to evidence being taken at a location convenient to witnesses if the need arises on the basis that that evidence is then used in the hearing in Sydney.

1. The second affidavit relied upon by OCL was sworn by James Cook, a project manager employed by KG, who said that in the performance of his duties as receiver and manager of OCL Mr Coates received instructions from KG whose principal officers in Australia are at North Sydney in New South Wales. He referred to the location of various directors of the parties and said that OCL had commenced the proceedings in Sydney because the principal officers and negotiators for the respective parties are resident or based in that city.

2. The threshold point is taken for OCL that s. 48 of the Federal Court of Australia Act only empowers the Court or a judge to give a direction that a proceeding be conducted or continued in some particular place where such a direction is sought by motion brought in the proceeding itself. The section provides:
   

"The Court or a judge may at any stage of a proceeding in the Court direct that the proceeding or a part of the proceeding be conducted or continued at a place specified in the order subject to such conditions, if any, as the Court or judge imposes."

1. In the ordinary course I have no doubt that a motion in the proceedings sought to be transferred is the proper way in which to seek an order such as that presently sought. Section 48, however, is a provision whose purpose, as enunciated by the Full Court in National Mutual Holdings Pty Limited v. The Sentry Corporation (1988) 19 FCR 155 is to serve the ends of justice and the most efficient administration of the Court. It would require clear language, in my opinion, to impose a purely procedural fetter upon its operation. In this case, in which the application in New South Wales has not reached its first return date and is not under the administrative control of any judge at the present time it is, in my opinion, open to the Court to consider the application presently before it upon the merits so that if well-founded the party seeking the transfer is not put to the expense and inconvenience of having to instruct solicitors and brief counsel in New South Wales in order to achieve a proper result. In my opinion, the material presently before the court is strongly supportive of the proposition that the application would have been better commenced and should in any event now continue in the Western Australian District Registry.

2. The considerations of convenience invoked by OCL relate in large part to the familiarity that its Sydney-based solicitors have developed in relation to the affairs of SOH and its relationship with OCL and SECL. There is reference and reliance placed also upon the location of various directors in Sydney and a make- weight argument about the closure of the District Registry in Western Australia. The case concerns two companies incorporated in Western Australia whose assets are located in this State and whose dispute arises out of dealings in relation to assets located in this State. The receiver and manager of OCL is located here, as is Mr Trevor, an SECL scheme administrator, who is also a director of SOH opposing the winding up. The proposed provisional liquidator is located in Western Australia. These are the people who do or will carry a substantial legal responsibility for the affairs of the parties and SOH if a winding up order is made. If a provisional liquidator is appointed, then it is appropriate that the supervising court be convenient to his location. The same is true of any liquidator, if one is ultimately appointed. The question of how the hearing may best proceed can be left open. It is always possible in the Federal Court for evidence to be taken in one city for the purposes of proceedings initiated in or transferred to another. But those are matters that can be addressed in directions hearings in the pending winding up application.

3. In my opinion the application in this case should succeed and I propose to make the following orders:
   

(1) That the proceedings in action G3017 of 1993 be henceforth continued in the Western Australia district registry and be conducted in Perth.

(2) That there be liberty in action G3017 of 1993 for parties to apply for directions as to the venue for the hearing of any part of the proceedings.

(3) The costs of the application be reserved.

If this were a motion in the proceedings themselves, I think the costs would be reserved and I think that is the best course in this application and they can be then considered in the light of the substantial proceedings.