FEDERAL COURT OF AUSTRALIA

Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (Subject to Deed of Company Arrangement) (No 1) [2011] FCA 177

THE COURT ORDERS THAT:

1.    The application made by notice of motion dated 14 December 2010, be refused.

2.    The first and fourth defendants pay the plaintiffs' costs of the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    On 15 December 2010, I refused applications made by the first defendant, Loaders Traders Pty Ltd (subject to deed of company arrangement) (“Loaders”), and the fourth defendant, Lederberger Investments Pty Ltd (subject to deed of company arrangement (“Lederberger”) (collectively, “the applicants”), and ordered that the applicants pay the plaintiffs’ costs of the applications. The applicants, two companies subject to a deed of company arrangement (“DOCA”), sought:

(a)    by a notice of motion filed on 14 December 2010, an order vacating the trial fixed for 16 December 2010; and

(b)    informally, a stay of the proceeding.

2    The applications were supported by the affidavit of Dov Silberman, the applicants’ solicitor, affirmed 14 December 2010, and written submissions.

3    My reasons for refusing the applications are set out below.

4    The applications were opposed by the plaintiffs (Mediterranean Olives Financial Pty Ltd, Mediterranean Olives Estate Limited, Albany Financial Pty Ltd and WA Blue Gum Pty Ltd), who filed a chronology of the procedural steps in the proceeding.

5    The second, third, fifth and sixth defendants, Mr Rathner and Mr Coyne as deed administrators of the applicants, did not appear at the hearing of the applications.

Stay of proceeding

6    In his affidavit, Mr Silberman deposed that:

1.    On or before 13 December 2010, as former counsel originally retained in the matter returned the brief, he briefed new counsel.

2.    On 2 December 2010, Mr Silberman was served with an affidavit affirmed by Mr May, a director of the plaintiffs, deposing to a proceeding in the Supreme Court of Victoria commenced by the plaintiffs against Mrs Gita Lederberger as trustee of the deceased estate of Hirsch Lederberger, which involved many issues relevant to the current proceeding.

7    By the statement of claim filed in the Supreme Court matter, the plaintiffs claim amounts from Mrs Lederberger allegedly due to them in respect of investments made by Loaders, as a bare trustee or as agent for a partnership conducted by Lederberger, and the deceased estate of which Mrs Lederberger is the trustee. They allege that Mrs Lederberger, as executrix of the deceased estate, is jointly liable to pay the debts or to indemnify Loaders and that the plaintiffs are subrogated to Loaders’ right of indemnity.

8    The applicants submitted that the commonality of issues and parties with the Supreme Court proceeding justified an adjournment or stay of the present proceeding, in which the plaintiffs, as creditors for the same debts claimed against Mrs Lederberger in the Supreme Court proceeding, seek to terminate the DOCA under s 445D(1) of the Corporations Act 2001 (Cth) (“the Act”) and set aside the resolutions to execute the DOCAs under s 600A(1) of the Act, alleging, inter alia, that the resolutions were contrary to the interests of the creditors as a whole because the administrators failed to investigate adequately Loaders’ business, property and affairs, including, importantly, the potential claims of Loaders and Lederberger against Mrs Lederberger as trustee of the deceased estate, the financial position of the deceased estate and whether a NAB charge over the companies extended to partnership property.

9    The applicants submitted that Mrs Lederberger’s alleged liability is an important question in both proceedings and on which the Supreme Court (which will have the benefit of the testimony witnesses and relevant documents) must rule.

10    The applicants relied on Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd (1992) 34 FCR 287, in which Lockhart J discussed the Court’s power to grant a temporary stay of proceedings, to which the following factors were relevant (at 291):

•    Which proceeding was commenced first.

•    Whether the termination of one proceeding is likely to have a material effect on the other.

•    The public interest.

•    The undesirability of two courts competing to see which of them determines common facts first.

•    Consideration of circumstances relating to witnesses.

•    Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

•    The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

•    How far advanced the proceedings are in each court.

•    The law should strive against permitting multiplicity of proceedings in relation to similar issues.

•    Generally balancing the advantages and disadvantages to each party.

11    The applicants submitted that a stay of this proceeding, pending the hearing and determination of the Supreme Court proceeding, could reduce the issues in this proceeding, avoid a multiplicity of proceedings and discourage the undesirable practice of commencing proceedings with common issues in different courts, without occasioning prejudice to the plaintiffs.

12    The applicants, while conceding that the stay application was brought at the eleventh hour, attributed that to the plaintiffs’ late notice of the Supreme Court proceedings.

13    That submission was, however, unpersuasive. The chronology filed by the plaintiffs (the accuracy of which was undisputed) indicated that the parties knew of the existence of the Supreme Court proceeding as early as 12 April 2010, when a concurrent mediation was discussed at a directions hearing.

14    Further, although Mr Silberman assumed management of the case on behalf of the applicants only after a change of solicitor in October 2010, his email to the Court of 13 December 2010 stated that when retained in October 2010, he was awaiting delivery of files and was advised that several files relating to the associated Supreme Court proceeding were being sought.

15    Thus no satisfactory explanation was advanced for the extremely late application for a stay.

16    Nor did the circumstances otherwise favour the grant of a stay.

17    In the present proceeding, commenced in December 2009 prior to the commencement of the Supreme Court proceeding, preparatory steps were completed and the hearing date was imminent. In contrast, the Supreme Court proceeding was neither ready nor fixed for trial.

18    There was, in my opinion, no demonstrated likelihood that a stay would result in the ultimate discontinuance of this proceeding, as the overlap of issues was limited. The plaintiffs’ success in the Supreme Court proceeding was neither assured nor dispositive of the majority of issues in this matter.

19    Further, a substantial risk of inconsistent findings and duplication of evidence was not established. The present proceeding does not require a determination of Mrs Lederberger’s liability to indemnify Loaders, but consideration of whether the administrators adequately identified and investigated such potential liability.

20    Moreover, it was desirable that the status of the DOCA be resolved without delay. A stay of the proceeding would have entailed the loss of the imminent trial date, thereby occasioning prolonged and indefinite delay in payment of a dividend to participating creditors under the DOCA, uncertainty, and potential prejudice to all those associated or dealing with the companies. No countervailing advantages were demonstrated.

21    Nor did the circumstances warrant vacation of the trial date.

22    In Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (“Aon”), the High Court rejected the view expressed in previous authority that adjournments and vacation of trial dates should be liberally granted where a costs order would sufficiently address the resultant prejudice.

23    In Aon, the High Court made clear that case management requirements, the prejudice to other parties in the list and the inherent prejudice constituted by delay must be considered. It was also relevant to consider whether the applicant had advanced an adequate explanation.

24    In the present case, there was no satisfactory explanation for the last minute application to vacate the trial date. Further, delay in resolving the disputed status of companies subject to a DOCA posed significant potential prejudice to the plaintiffs, participating creditors under the DOCA, employees, parties dealing with the companies and the public.

25    In October 2010, the matter was transferred to my docket to be heard as soon as possible. Following many interchanges between the Court and all parties, the hearing was fixed on a one day estimate for the last sitting day of the year, the only date convenient to counsel and the applicants’ solicitor, a sole practitioner. When the applicants subsequently revised the original estimate (asserting that further time was necessary, requiring an adjournment if the hearing time could not be extended), I determined that the trial would proceed as scheduled, but that the Court would sit late and would then consider any requirement for further hearing time.

26    While the applicants’ solicitor deposed to difficulties in obtaining the file, the unavailability of the barrister he had briefed initially and foreshadowed a new defence, those problems were not raised prior to Monday, 13 December 2010, although the trial was to commence on 16 December 2010.

conclusion

27    For the above reasons, I refused the applications for a stay of the proceeding or a vacation of the trial date.

Associate:

Dated:    4 March 2011

SCHEDULE OF PARTIES

Mediterranean Olives Financial Pty Ltd

Mediterranean Olives Estate Limited

Albany Financial Pty Ltd

WA Blue Gum Ltd

Plaintiffs

Loaders Traders Pty Ltd (ACN 069 549 042) (Subject to Deed of Company Arrangement)

First Defendant

Gideon Rathner and David Coyne (as Deed Administrator of Loaders Traders Pty Ltd (ACN 069 549 042) (Subject to Deed of Company Arrangement))

Second and Third Defendants

Lederberger Investments Pty Ltd (ACN 106 050 462) (Subject to Deed of Company Arrangement)

Fourth Defendant

Gideon Rathner and David Coyne (as Deed Administrator of Lederberger Investments Pty Ltd (ACN 106 050 462) (Subject to Deed of Company Arrangement))

Fifth and Sixth Defendants