FEDERAL COURT OF AUSTRALIA

Corporations - application for statutory inquiry into the conduct of a provisional liquidator - whether general law claim may be joined with application for statutory inquiry.

Corporations Law - s 536

JOHN ZAKRZEWSKI V PETER DAVID RODGERS AS PROVISIONAL LIQUIDATOR OF DESARO DESIGN INTERIORS PTY LIMITED

 NG 3231  of   1997

JUDGE:          BEAUMONT J.

PLACE:          SYDNEY

DATE:            18 FEBRUARY 1998

AN APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

ORDERS:

1.         The claims made in the amended application, with the exception of the application under s 536, be struck out.  This order will not operate as a dismissal on the merits of those claims.

2.         The costs of this motion will be the respondent’s costs in the principal proceedings.

3.         Application for statutory inquiry stood over to 13 March 1998 for directions.

4.         Any further evidence to be relied upon by the applicant in support of that claim, and an outline of any submission by the applicant that a prima facie case for an inquiry has been made out, be filed and served by 6 March 1998.

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

AN APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

BEAUMONT J:

Before the Court is a notice of motion by the respondent in the principal proceedings for the summary dismissal of the principal proceedings on the ground that they are an abuse of process because, the respondent says, the proceedings disclose no arguable cause of action.  The proceedings were brought pursuant to an amended application filed by the applicant, who was then unrepresented.  The respondent was sued as a provisional liquidator of Desaro Design Interiors Pty Limited, now in liquidation. 

In his amended application, the applicant purported to claim the following relief:

  “1.     That the Court conduct an inquiry into the conduct of Peter David Rodgers as provisional liquidator of Desaro Design Interiors Pty Ltd... (now in liquidation) under section 536(1) and (3) of the Corporations Law.”

The applicant claimed the following orders:

“1.       The applicant claims the following orders

(i)         That the provisional liquidator of Desaro Design Interiors Pty Ltd... (now in liquidation), namely Peter David Rodgers, pay all monies due and payable to Network Painting and Decorating Pty Ltd... (now in liquidation) plus interest.

2.         That the Court order that Peter David Rodgers of Love and Rodgers chartered accountants and the firm of Love and Rodgers be struck off the list or lists of the Federal Court as:-

(i)         Court appointed administrators

(ii)        Court appointed provisional liquidators

(iii)       Court appointed liquidators

3.         That the Court order damages as a result of the negligent conduct of Peter David Rodgers as provisional liquidator of Desaro Design Interiors Pty Ltd... (now in liquidation) to Network Painting and Decorating Pty Ltd... (now in liquidation) for

(A)       Loss of earnings from September 1992 due to adverse listing with CRAA to present.

(B)       Pain, suffering and damage to the reputations of John and Maria Zakrzewski as directors.

(C)       Loss of potential earnings due to the liquidation of Network Painting and Decorating Pty Ltd.... (now in liquidation).

(D)       Both economic and non economic loss of well being.

(E)       Any other order that the Court may wish to make.

4.         That Peter David Rodgers as provisional liquidator of Desaro Design Interiors Pty Ltd... take immediate action to restore Network Painting and Decorating Pty Ltd... (now in liquidation) to its former status.”

As has been noted, although the applicant is now represented by counsel, in drawing his amended application and in preparing his affidavit in support of it, the applicant apparently acted without the benefit of specialist professional assistance in an area of complexity and difficulty.  The amended application is the only form of pleading, or its equivalent, filed on behalf of the applicant.  His affidavit in support could not, even arguably, be treated as such an equivalent.

In my opinion, the amended application does not adequately plead the case or cases sought to be made on behalf of the applicant.  In particular, it is not clear whether, apart from the application for the statutory inquiry, the specific orders 1 to 4, as requested in the application are sought in the exercise of the Court's jurisdiction under s 536(1) or (3) of the Corporations Law; or rather are claimed to arise independently, as free-standing claims;  or whether they are sought in the exercise of the Court's inherent jurisdiction (see Re Siromath Pty Limited (No. 3) (1991), 25 NSWLR 25 (at 29));  or arise under the general law (either at common law in negligence or in equity for breach of fiduciary duty).

If they are advanced as general law claims, a question of case management will arise as to the appropriateness of their joinder.  (See The Rochester Communications Group Pty Limited v Adler, Beaumont J, 24 January 1997, unreported;  cf. Sydlow v T.G. Kotselas (1996) 20 ACSR 47).  In principle, it is wrong to attempt to tack on to a s 536 inquiry a series of private claims said to arise under the general law.  The reason is that the jurisdiction to be exercised is quite different.  On the one hand, the Court's authority to act springs from its statutory power to supervise its own officers, an inquiry which will only be embarked upon if a prima facie case is demonstrated.  (See e.g. Burns Philp Investments Pty Limited v Dickens (1993) 11 ACLC 272).  Although the exercise of judicial power is involved, the inquiry necessarily has an administrative character.  On the other hand, the pursuit here of the general law claims has an entirely different adjectival base.  Any attempt to combine them with a statutory inquiry is only to be undertaken in exceptional cases, for instance where the issues of fact and of law clearly emerge, in which case the obvious procedural and evidentiary problems might be avoided. 

But no clear definition of those issues is evident in the present case.  The matter is further complicated by the respondent's claim that there is an issue estoppel arising by virtue of the determination of the Local Court. 

On the whole, having had the benefit of an explanation by counsel of their respective understandings of the issues likely to arise if all of the claims made in the amended application are allowed to go forward, I have come to the conclusion that it is inappropriate and inconvenient to seek to join the additional claims, especially any private cause of action, with the claim for the statutory inquiry.

ORDERS

I will therefore order that the claims made in the amended application, with the exception of the application under s 536, be struck out.  I will direct that this order will not operate as a dismissal on the merits of those claims.  The costs of this motion will be the respondent's costs in the principal proceedings.  I will stand the application for the statutory inquiry over to 13 March for directions.  I direct:  (1) any further evidence to be relied upon by the applicant in support of that claim;  and (2) an outline of any submission by the applicant that a prima facie case for an inquiry has been made out - be filed and served by 6 March.

Associate:

Dated:              18 February 1998