CATCHWORDS
NOTICE OF MOTION - applicant in principal proceedings in liquidation - cross-claim against applicant - dismissal of proceedings for want of prosecution - whether stay of proceedings should be granted - no exceptional circumstances to grant leave.
Corporations Law s 471B
Ogilvie-Grant v East, Liquidator of Gordon Grant and Grant Pty Ltd (1983) 7 ACLR 669
SOLOMONS FRANCHISE SYSTEMS PTY LIMITED & ORS v TAYDEX PTY LTD & ORS
No VG 30 of 1994
SPENDER J
BRISBANE
15 APRIL 1997
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY No VG 30 of 1994
GENERAL DIVISION
BETWEEN: SOLOMONS FRANCHISE SYSTEMS PTY LIMITED (ACN 008 094 899)
First Applicant
AND: NO 1 RABEREM PTY LTD (ACN 07 733 995)
Second Applicant
AND: NO 2 RABEREM PTY LTD (ACN 007 733 986)
Third Applicant
AND: NO 3 RABEREM PTY LTD (ACN 007 733 977)
Fourth Applicant
AND: TAYDEX PTY LTD (ACN 010 809 739)
First Respondent
AND: MICHAEL ROY PARR
Second Respondent
AND: CLIVE JOHN WALKER
Third Respondent
CORAM: SPENDER J
PLACE: BRISBANE
DATE: 15 APRIL 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. The proceedings on behalf of each of the four applicants in matter No VG 30 of 1994 are dismissed.
2. Each of the applicants is to pay the costs of the respondents in the proceedings, including reserved costs, to be taxed if not agreed.
3. Leave ought not to be granted in respect of the cross-claim if that matter is not dealt with satisfactorily in the view of Mr Parr, by the liquidator.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY No VG 30 of 1994
GENERAL DIVISION
BETWEEN: SOLOMONS FRANCHISE SYSTEMS PTY LIMITED (ACN 008 094 899)
First Applicant
AND: NO 1 RABEREM PTY LTD (ACN 07 733 995)
Second Applicant
AND: NO 2 RABEREM PTY LTD (ACN 007 733 986)
Third Applicant
AND: NO 3 RABEREM PTY LTD (ACN 007 733 977)
Fourth Applicant
AND: TAYDEX PTY LTD (ACN 010 809 739)
First Respondent
AND: MICHAEL ROY PARR
Second Respondent
AND: CLIVE JOHN WALKER
Third Respondent
CORAM: SPENDER J
PLACE: BRISBANE
DATE: 15 APRIL 1997
REASONS FOR JUDGMENT
I have before me a notice of motion filed by Michael Roy Parr, the second respondent in proceedings No VG30 of 1994, which is brought by four related applicants, Solomons Franchise Systems Pty Ltd, and their No 1 Raberem Pty Ltd, No 2 Raberem Pty Ltd, No 3 Raberem Pty Ltd. The proceedings arose out of franchise arrangements in which there was a cross-claim brought by Taydex Pty Ltd. Mr Parr, the applicant on the motion, is the as second respondent in the principal proceedings.
The notice of motion, with which I am presently concerned, filed 5 February 1997, seeks orders that the plaintiff's action be dismissed for want of prosecution, that the judgment be entered in favour of the respondents and that the applicant pay the respondents' costs and such costs to be fixed and paid within 14 days. In relation to the affidavit filed by Mr Parr in support of his motion he set out the recent history of the litigation. He noted that at a directions hearing on 9 February 1996 the applicants applied to have this action transferred to the District Court in Queensland, and that on that date Drummond J adjourned the application requiring the applicants to file a notice of motion.
That notice of motion was served on Mr Parr on 8 March 1996 and listed for hearing on 2 April 1996. There was a request made of Mr Parr that that application be adjourned because of counsel's engagement in another place, and Mr Parr consented to that adjournment. On 1 April 1996 he received a letter from the solicitors for the applicants confirming that the solicitor would attend on 2 April 1996 and adjourn the matter. Mr Parr deposes that, to the best of his knowledge, this notice has never been relisted for hearing. He says in his affidavit:
“ As no further action was taken I wrote to the liquidators of the applicants, who were initially Ferrier Hodgson, and later Ernst and Young, on 8 May 1996, 22 May 1996, 4 June 1996, and 13 August 1996.”
He has never received any reply to those letters.
A directions hearing on 26 July 1996 was adjourned to 6 September, and on that day no appearance was entered by the applicants. The hearing for directions was adjourned until 1 November 1996. On that occasion a solicitor appeared for the applicants and sought leave to withdraw, which was granted. The basis for that was that he had received no instructions from the applicants. Today none of the applicants has appeared, and the motion presently before me seeks dismissal of the applicant's motion for want of prosecution and for judgment on the cross-claim.
The material filed by Mr Parr in his affidavit most recently produced to the court indicates that each of the applicants is in liquidation, and that in relation to the first applicant, Solomons Franchise Systems Pty Ltd, a company search indicates that on 7 June 1996 a receiver and manager was appointed. On 17 June 1996 the Australian Securities Commission received notification of resignation or removal of the administrator. On the same day, notification of appointment of a liquidator was received pursuant to a creditors voluntary winding up, and notice under s 446A of the Corporations Law (‘the Law’) of a special resolution of a meeting of creditors of the company resolving that the company be wound up pursuant to s 439C(c) of the Law.
The position then is that in June 1996 the first applicant was placed in liquidation. Each of the second, third and fourth respondents is also in liquidation, a receiver and manager being appointed on 3 May 1995 in respect of that matter, a liquidator from Messrs Ernst and Young was appointed pursuant to a creditors' meeting on 5 June 1996.
In the circumstances, the position is as indicated by s 471B of the Law which provides:
“ While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:
(a) a proceeding in a court against a company, or in relation to the property of the company; or
(b) enforcement process in relation to such property;
except with the leave of the Court in accordance with such terms (if any) as the Court imposes.”
In relation, first of all, to the application to have the proceedings dismissed for want of prosecution, I am satisfied in the light of the correspondence that the liquidators are aware of this litigation, and it seems to me that no good reason would be served by not granting leave to Mr Parr to proceed with the relief sought in the notice of motion that the proceedings be dismissed for want of prosecution, and I so order. That is to say, proceedings on behalf of each of the four applicants in proceedings No VG30 of 1994 are dismissed, and each of the applicants is to pay the costs of the respondents in those proceedings, including reserve costs, to be taxed if not agreed.
So far as the prosecution of the cross claim is concerned, s 471B of the Law operates as a stay to the further continuance of that cross claim unless the court grants leave. There is nothing before me to indicate that the claims of the respondents in this litigation are sufficiently exceptional or special to differentiate them from the other claims of creditors against any of the applicants. The purpose of the section in the Law providing for a stay of proceedings and suspension of an enforcement process, was referred to by Lord Justice James in Re David Lloyd and Co (1877) 6 Ch D 339 at 344, where his Lordship said:
“ These sections in the Companies Act and the corresponding legislation with regard to bankrupts enabling the court to interfere with actions, were intended, not for the purpose of harassing, or impeding, or injuring third persons, but for the purpose of preserving the limited assets of the company or bankrupt in the best way for distribution amongst all the persons who have claims upon them. There being only a small fund or a limited fund to be divided among a great number of persons, it would be monstrous that one or more of them should be harassing the company with actions and incurring costs which would increase the claims against the company and diminish the assets which ought to be divided among all the creditors.”
McPherson J in Ogilvie-Grant v East, Liquidator of Gordon Grant and Grant Pty Ltd (1983) 7 ACLR 669 said at p 672 about the stay of proceedings in compulsory winding up:
“ A more convincing explanation is that, without the relevant restriction, a company in winding up would be subjected to a multiplicity of actions which would be both expensive and time consuming, as well in some cases as unnecessary.”
The position is that after a company has been placed in liquidation the creditors have to accept the collective enforcement procedure involved in proving for their debts to the satisfaction of the liquidator unless the court gives leave to enforce in some other way.
In the circumstances of this case, the position of creditors of each of the applicants in the principal proceedings is that those creditors have the right to prove in the liquidation of that company, and that includes the right of any of the respondents so to prove. I do not think any useful purpose could be served by the court itself embarking on an inquiry as to the extent of the debt owing pursuant to the cross claim. In those circumstances, I decline to grant leave in respect of the cross claim if that matter is not dealt with satisfactorily in the view of Mr Parr by the liquidator. There are provisions in the Law to permit that to be dealt with. At the end of the day, commercial realities and the likely return are likely to prove determinative of what steps are now taken in relation to the matter.
The orders are as I have indicated.
I certify that this and the preceding five (5) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.
Associate
Date: 15 April 1997
No appearance for the applicants
The second respondent appeared in person
No appearance for the first and third respondents
Date of hearing : 15 April 1997
