Xat Ky v Australvic Property Management Pty Ltd
[2007] FCA 1595
•18 October 2007
FEDERAL COURT OF AUSTRALIA
Xat Ky v Australvic Property Management Pty Ltd [2007] FCA 1595
IN THE MATTER OF AUSTRALVIC PROPERTY MANAGEMENT PTY LTD
(ACN 113 858 021)XAT KY AND SIV CUNG HENG v AUSTRALVIC PROPERTY MANAGEMENT PTY LTD (ACN 113 858 021)
VID 210 OF 2007JESSUP J
18 OCTOBER 2007
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 210 OF 2007
IN THE MATTER OF AUSTRALVIC PROPERTY MANAGEMENT PTY LTD
(ACN 113 858 021)
BETWEEN:
XAT KY
First PlaintiffSIV CUNG HENG
Second PlaintiffAND:
AUSTRALVIC PROPERTY MANAGEMENT PTY LTD (ACN 113 858 021)
Defendant
JUDGE:
JESSUP J
DATE OF ORDER:
18 OCTOBER 2007
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The Notice of Motion filed by Issac Brott & Co on 11 October 2007 be amended by substituting the words “Brian Leslie Fisher” for the words “the applicant” in the first paragraph thereof.
2.The motion referred to in the said notice be dismissed.
3.Brian Leslie Fisher pay the costs of:
The plaintiffs
The defendantAustralian Securities and Investment Commission
R & A Cab Co
T & G Welding
4. Brian Leslie Fisher pay the disbursements (if any) of:
Mr F Bray (as Trustee of the Bray Family Superannuation Fund)
Mr W Edwards
Ms K Murphy
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 210 OF 2007
IN THE MATTER OF AUSTRALVIC PROPERTY MANAGEMENT PTY LTD
(ACN 113 858 021)
BETWEEN:
XAT KY
First PlaintiffSIV CUNG HENG
Second PlaintiffAND:
AUSTRALVIC PROPERTY MANAGEMENT PTY LTD (ACN 113 858 021)
Defendant
JUDGE:
JESSUP J
DATE:
18 OCTOBER 2007
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On 5 October 2007, Middleton J dismissed an application for review of a decision of a Deputy Registrar of the court in relation to Australvic Property Management Pty Ltd (“APM”) and ordered that APM be wound up in insolvency, pursuant to s 459A of the Corporations Act 2001 (Cth) (“the Corporations Act”).
On 11 October 2007, Issac Brott & Co, who had been solicitors for APM in the proceeding before Middleton J, caused a Notice of Motion to be issued in that proceeding. By its terms, this document gave notice that APM would move the court for the following orders:
1.The time for service of this application be abridged to enable it to be heard at the next available court date;
2.Paragraph 3 and 4 of the orders of the Honourable Justice Middleton made on 5 October 2007 be stayed until the hearing and determination of the appeal.
3.That Brian Leslie Fisher have leave to prosecute the appeal on behalf of the applicant.
4.The Respondent pay the Plaintiff’s costs of the appeal.
It transpired that this Notice of Motion was issued without the authority of APM. It had been issued on the instructions of Brian Leslie Fisher, the person referred to in par 3 of the orders sought. According to the reasons of the trial Judge, Mr Fisher was the secretary, and the only director, of APM. Mr Levine, who moved the court in accordance with the terms of the notice, said that it had been an oversight to engross the notice as though given by APM, and that the true moving party was Mr Fisher. In the circumstances, I shall order that the notice be amended by the substitution of the words “Brian Leslie Fisher” for the words “the applicant” in the first paragraph thereof.
As is apparent from the terms of the Notice of Motion, Mr Fisher desires to have APM appeal from the orders made by Middleton J, and to secure a stay of the operation of those orders pending the hearing and determination of such an appeal. However, because of the operation of s 471A(1) of the Corporations Act, Mr Fisher cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of APM. In the circumstances, he seeks the approval of the court, pursuant to par (d) of subs (1A) of the section, for him to act as director of APM for the limited purpose of causing APM to lodge, and thereafter to prosecute, an appeal from the orders made on 5 October 2007.
Notwithstanding the terms of par 2 of the orders sought in the Notice of Motion, as Mr Levine developed his argument before me, Mr Fisher did not ask that I entertain an application for a stay of the orders of 5 October at this stage. He confined his application to par 3 of the orders sought. Mr Levine indicated that he anticipated that, if Mr Fisher were given approval under s 471A(1A)(d) of the Corporations Act, an appeal would shortly be lodged, and an application for a stay of the orders would be made promptly thereafter.
The Notice of Motion was served upon the plaintiffs in the proceeding before Middleton J (the applicant creditors), upon the liquidator appointed pursuant to the orders of Middleton J, upon the Australian Securities and Investment Commission (“ASIC”) (which was heard by Middleton J as an intervenor) and upon a number of supporting creditors. The positions which they adopted varied in point of detail, but all save the liquidator opposed the making of any orders of the kind sought by Mr Fisher. Subject to suitable protections against the exposure of the company’s assets to the costs of the litigation, the liquidator indicated that he would submit to any order which the court might make pursuant to par 3 of the orders sought in the Notice of Motion.
The primary case put on behalf of Mr Fisher was that, in the absence of some kind of order such as that which he seeks, APM would effectively be deprived of its statutory right of appeal, because only the liquidator could exercise that right, and he would have neither the interest, nor any incentive, to do so. Indeed, Mr Levine submitted, in effect, that there would be something very odd about a liquidator causing the company in question to appeal against an order which provided for his or her own appointment.
Mr Levine submitted that APM would be disadvantaged – and he implied that its creditors would likewise be disadvantaged – if it were not able to challenge the winding up orders on appeal. He referred to proceedings in the Supreme Court of Victoria, in which APM is the plaintiff, and in which it seeks to recover various sums from eight defendants, the recovery of which would at least have the potential to affect the conclusion proper to be drawn as to its solvency. He submitted that the orders of 5 October by which APM was wound up had the effect of taking the prosecution of those proceedings out of the hands of Mr Fisher and his solicitors, and subjecting them to the control of the liquidator who, necessarily, lacked the detailed knowledge necessary to maximise the prospects of a successful outcome therein. In an affidavit filed in support of the Notice of Motion, Mr Fisher referred also to other proceedings, including proceedings in this court, in which APM is a party. He made the same point about them as Mr Levine made about the Supreme Court proceedings, namely, that the placement of APM under the control of the liquidator will severely prejudice the capacity of APM to conduct those proceedings in a way which maximises the prospect of successful outcomes.
Having thus demonstrated the potential detriment to APM of the winding up orders made on 5 October, Mr Levine submitted that the only further requirement which lay upon him under s 471A(1A)(d) of the Corporations Act was to deal with the prospect that the assets of APM, which would otherwise be available for distribution to creditors, might be dissipated upon the costs of the appeal, and to deal also with the contingent claims of respondents to the appeal to their costs, should the appeal be unsuccessful. He informed me that Mr Fisher was prepared to give an appropriate undertaking to the court to the effect that the appeal would be conducted entirely at his own personal expense, and that the assets of APM would not be resorted to for such a purpose. He indicated also that Mr Fisher would be prepared to give security for the respondents’ costs in the appeal, provided that the amount of the security was within reasonable limits.
Those who opposed an order which would permit Mr Fisher to exercise the functions of a director of APM for the purposes of the proposed appeal did so substantially upon the ground that Mr Fisher had declined to put a draft Notice of Appeal before the court. The absence of any properly articulated grounds of appeal, according to these parties, left the court with no basis upon which to make an assessment of the prospects of any such appeal, and, therefore, with no way to assess the utility of the course proposed by Mr Fisher. They submitted that it was not sufficient for Mr Fisher to defer any consideration of the content or strength of his grounds of appeal to the occasion upon which he caused the company to make application for a stay of the orders of 5 October. What Mr Fisher sought under s 471A(1A) was a dispensation from a statutory rule which stipulated what would be permitted in the normal course: a departure from that rule required a case to be made out, and that necessarily involved an identification of purpose, and an assessment of the strengths and weaknesses of the propositions inherent in that purpose.
Mr Levine submitted that the absence of draft grounds of appeal, and the prospects of any appeal generally, were not relevant to the question arising under s 471A(1A)(d) of the Corporations Act. He submitted that it would not be until approval was (if it is to be given) that APM would be in a position to lodge an appeal, and, if it did, the grounds then relied upon would provide content for any issue that might arise as to prospects (on an application for a stay pending appeal, for instance). However, lest I should be persuaded by the respondents that the prospects of any such appeal as Mr Fisher proposed were relevant to the exercise of my discretion under s 471A(1A), I invited Mr Levine to address me with respect to the errors in the reasons of Middleton J which were intended to provide content to the grounds of appeal which would, ultimately, appear in Mr Fisher’s Notice of Appeal.
Accepting that invitation, Mr Levine made two submissions. Each related to the Supreme Court proceedings to which I have referred. In those proceedings, the sum of about $1.4 million has been paid into court. On 10 September 2007, Middleton J had granted APM leave to apply to the Supreme Court to transfer those moneys to this court so that they might become available to APM’s creditors. It was submitted by APM to Middleton J that he should, at least for the time being, exercise his discretion not to wind up APM, pending an application by APM in the Supreme Court to have the moneys transferred to the Federal Court, or pending the establishment of an entitlement to those moneys by APM. On this subject, Middleton J said:
I have also allowed some time to observe whether money held in the Supreme Court of Victoria, to which APM says it is entitled, could be paid into the Federal Court to satisfy the claims accepted by APM, including the claims of the creditors. I did this because it was submitted on behalf of APM that the proceedings instituted in the Supreme Court by APM, seeking that it be paid the money in court in priority to other competing claims, would be dealt with quickly and I considered that APM should be given the opportunity to pay out the creditors it accepted had valid claims. However, it appears that whilst expedition has been given to that proceeding, the money in court is in substantial dispute, and I cannot be satisfied that that proceeding will be completed within the reasonable future or that the money held in the Supreme Court of Victoria will be available to the creditors.
I am mindful that the Supreme Court proceedings are in the Commercial List, and that the court will be in a position on 17 October 2007 to determine how the matter is to proceed. There is a possibility the matter may be heard in late October 2007, but having regard to statements made by the various participants at the latest directions hearing before the Supreme Court and the content of the statement of claim in the proceedings, I think this is extremely unlikely. The learned judge in the Supreme Court did indicate that if the matter was ready for trial and APM could convince the court on proper affidavit material there was an urgency about the matter, he would endeavour to hear it in the last week of October 2007. However, his Honour did suspect that the matter would not be ready and, in any event, the matter was not set down for a hearing. Therefore, I am not satisfied that the proceedings before the Supreme Court (which do involve a number of competing claims and likely factual disputes) will be resolved within any reasonable time.
Mr Levine first submitted that it was not sufficient for his Honour to observe that “the money in court is in substantial dispute”, or that the Supreme Court proceedings “do involve a number of competing claims and likely factual disputes” as a basis for not deferring the making of a winding up order. He submitted that it was incumbent on his Honour, in the proper exercise of his discretion, to embark upon a systematic assessment of the merits of the Supreme Court proceedings, and to make, in effect, a judicial prediction, or at least an estimation, of the likely result thereof. Although he referred to no authority directly on point, Mr Levine submitted that the position was analogous with that which came before the High Court in Corney v Brien (1951) 84 CLR 343, namely, that a court has jurisdiction in bankruptcy proceedings to go behind, and, therefore, in appropriate cases should go behind, a judgment upon which the relevant debt is based.
I do not accept the proposition that it was a miscarriage of the exercise of his discretion for Middleton J not to have made the kind of prediction or estimate for which Mr Levine contended. Neither do I accept that the position was relevantly analogous to a Corney v Brien situation. Upon the state of affairs which Mr Levine was prepared to assume for the purposes of this submission, his Honour had reached the conclusion that APM was insolvent. The existence of the Supreme Court proceedings, in which APM was the moving party to recover moneys which were then in dispute, was a consideration to which his Honour paid due regard in the exercise of his discretion. He was, in my opinion, required to go no further than to note the existence and nature of those proceedings, and to recognise that APM’s entitlement to the moneys was a matter of substantial dispute. Not being the court in question, it is difficult to see how his Honour might have given greater definition to the facts as they then existed than is contained in the paragraphs of his reasons set out above. Any attempt on his part to embark upon the kind of estimation or prediction for which Mr Levine contended would, in my view, have been to go further than was warranted by the facts as they existed at the time when he exercised his discretion: it would have been to attempt to anticipate the future course of events. I do not suggest, of course, that it would necessarily be outside the role of a Judge in the position of his Honour to take into account the apparent strengths and weaknesses of a case being conducted by the company in question in other proceedings, the outcome of which might have consequences for the conclusion proper to be reached on the question of solvency. However, I consider that a Judge would follow that course only in an appropriate case, that is to say, in a case in which those strengths or weaknesses were reasonably apparent. It is not, in my view, incumbent upon a Judge (in order to avoid a conclusion that the exercise of his or her discretion has miscarried) to drill down into the merits of a proceeding pending in another court in circumstances where the strengths and weaknesses of the company’s position are not reasonably apparent.
Mr Levine’s second submission related to the following passage in Middleton J’s reasons:
In any event and perhaps more significantly, even assuming in APM’s favour that all the funds in the Supreme Court are in fact the assets of APM, and would be available to pay the creditors and those creditors who APM regard as making valid claims, I would still find that APM has failed to prove its solvency. This is because did this was the very assumption in Mr Miller’s report, which report in my view not demonstrate that APM was solvent even on this assumption. Therefore, even if APM is totally successful in the Supreme Court of Victoria, this would not materially affect the position I have now reached as to the future of APM. Therefore, to allow APM any further time, and await the result of the Supreme Court proceedings, would be of no consequence.
Although the actual thrust of the submission was not altogether clear, I rather gather that it involved the proposition that the recovery of the full $1.4 million being held by the Supreme Court would have been sufficient at least to satisfy the claims of the applicant creditors, and of the supporting creditors who took an active role in the proceedings before Middleton J. Thus, according to Mr Levine, Middleton J was wrong to conclude that the recovery of those moneys would have made no difference to the outcome on the question of solvency.
I cannot accept this submission. The issue before his Honour was whether APM was solvent. That required a broad assessment, taking into account the overall financial circumstances of APM. His Honour was not confined to the potential impact upon the solvency of APM of the particular claims being made by those who appeared before him. In my view, it is not arguable that it was an error for his Honour not to have measured those claims alone against the prospect of APM recovering in full the moneys held in the Supreme Court.
Besides, the paragraph of his Honour’s reasons with which this submission was concerned was in the nature of an alternative basis for his Honour’s decision not to defer making a winding up order until there was some clearer resolution of APM’s rights in the Supreme Court proceedings. As I have made clear above, I do not consider that there was any error, even arguably, in the primary basis upon which his Honour dealt with the submission made on behalf of APM in this respect. That is to say, I accept that it was an entirely appropriate response to that submission for his Honour to go no further than to observe that APM was a plaintiff in other proceedings in which its entitlement to the moneys held in court was a matter of serious dispute.
That brings me back to the main submission made on behalf of the respondents to the Notice of Motion, namely, that the orders sought should not be made because of the failure of Mr Fisher to place before the court a draft Notice of Appeal or some focused articulation of the grounds upon which he would seek to challenge the judgment of Middleton J. I consider that there is merit in that submission. I would not, of course, go so far as to hold that the tender of a draft Notice of Appeal as such would always be an indispensable requirement for an application under s 471A(1A)(d), in circumstances where the point of the application is to facilitate an appeal against the winding up order itself. However, I consider that the identification of a case for appeal which has at least some apparent merit would normally be required. In the circumstances of the present case, I think it is required. In the absence of a draft notice, that requirement might have been satisfied by a submission which pointed clearly to aspects of the judgment below which demonstrated at least an arguable basis for an appeal. In the present case, however, I am not persuaded that Mr Fisher has any reasonably arguable case of error on the part of his Honour. In other words, I cannot discern what utility there would be in making an order of the kind he seeks.
Neither do I accept as self-evident the proposition that only Mr Fisher and his solicitors have the capacity professionally and diligently to represent APM in other litigation in which it may be involved in a way which maximises the prospects of successful outcomes. That companies presently involved in litigation are wound up is commonplace in the commercial world. It is a circumstance with which liquidators inevitably have to deal, and I am not prepared to assume that the liquidator in this case would not take all responsible steps to maximise the value of APM for the purpose of the winding up. However, the crucial point is that, once it has been found that APM is insolvent, the focus must be on the interests of the creditors. The proposition that it is the liquidator who is best able to maintain that focus, in other litigation as elsewhere, is one that I do regard as self-evident. The argument that I should regard it as a discretionary consideration in favour of permitting Mr Fisher to re-take control of APM for the sole purpose of controlling the conduct of the litigation to which I have referred is, I consider, entirely without substance.
Save for the matters to which I have referred, there is nothing in the facts of the case which would provide support for Mr Fisher’s application. In March, the Registrar took the view that APM should be wound up. APM was entitled to a hearing de novo before a Judge of the court, and that occurred. Middleton J also took the view that APM should be wound up. Reading his Honour’s reasons, this appeared to be a fairly clear case. Because of the proceedings to review the Registrar’s decision, the creditors have now been waiting a considerable time for the liquidator to commence work. I appreciate that the present application does not directly involve the question whether a stay of the orders of 5 October should be granted, but an order of the kind which Mr Fisher seeks would have utility only on the assumption that an appeal would be lodged, and thereafter prosecuted, in the Full Court. For reasons which I have attempted to express, I do not think that such a course has the apparent prospect of providing benefits to APM sufficient to outweigh the continued, and significant, practical deferral of the final resolution of the creditors’ claims which it would necessarily involve.
I propose to dismiss the Notice of Motion, and to order Mr Fisher to pay the costs of the parties who were professionally represented, and the disbursements (if any) of those who were not (in which latter respect I refer to my judgment in Neeson v Centrelink (2006) 154 FCR 489, 501).
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate:
Dated: 18 October 2007
Counsel for Mr B L Fisher: Mr J Levine Solicitor for Mr B L Fisher: Issac Brott & Co Counsel for Xat Ky and Siv Cung Heng: Mr P Bravender-Coyle Solicitor for Xat Ky and Siv Cung Heng: Dandanis & Associates Counsel for Australvic Property Management Pty Ltd: Mr G Goldsmith Solicitor for Australvic Property Management Pty Ltd: Goldsmiths Barristers & Solicitors Counsel for Australian Securities and Investment Commission: Mr M R Scott Solicitor for Australian Securities and Investment Commission: Australian Securities and Investment Commission Counsel for B & E Fisher Pty Ltd: Mr M Sifris SC Solicitor for B & E Fisher Pty Ltd: Issac Brott & Co Counsel for R & A Cab Co Mr P Fox Solicitor for R & A Cab Co John Matthies & Co Counsel for T & G Welding Pty Ltd: Mr C Lilley & Ms C Gobbo Solicitors for T & G Welding Pty Ltd: Saxbys Lawyers Creditor in person: Mr F Bray (as Trustee of the Bray Family Superannuation Fund) Creditor in person: Mr W Edwards Creditor in person: Ms K Murphy Date of Hearing: 16 October 2007 Date of Judgment: 18 October 2007
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