FEDERAL COURT OF AUSTRALIA

Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 614

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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.

THE COURT ORDERS THAT:

1.    The plaintiff has leave to discontinue its claim against Palentia Pty Ltd.

2.    There is no order as to costs.

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    The plaintiff in this proceeding and the plaintiffs in eight related proceedings seek leave to discontinue their claims against Palentia Pty Ltd (“Palentia”) pursuant to O 22 r 2(1)(d) of the Federal Court Rules (‘the Rules’), with no order as to costs. At the hearing today, the plaintiff was represented by its solicitor, Mr Connor. There was no appearance for Palentia.

2    The eight related proceedings are:

York Street Mezzanine Pty Limited (In liquidation) v Beck & Ors, No VID 484 of 2008;

Market Street Mezzanine Limited (In liquidation) v Beck & Ors, No VID 607 of 2008;

Bayshore Mezzanine Pty Limited (In liquidation) v Beck & Ors, No VID 608 of 2008;

Mount Street Mezzanine Pty Limited (In liquidation) v Beck & Ors, No VID 609 of 2008;

Bayview Heritage Mezzanine Limited (In liquidation) v Beck & Ors, No VID 611 of 2008;

Market Street Mezzanine No 2 Limited (In liquidation) v Beck & Ors, No VID 613 of 2008;

Cinema City Mezzanine Pty Limited (In liquidation), No 614 of 2008, and

North Sydney Finance Mezzanine Limited (In liquidation) v Beck & Ors, No VID 259 of 2009.

3    This and the eight proceedings referred to above are conveniently referred to as the ‘Directors’ Proceedings’. The Directors’ Proceedings were commenced and carried on by ASIC pursuant to s 50 of the Australian Securities and Investments Commission Act 2001 (Cth). It is intended that the same order for discontinuance be made in each of the Directors’ Proceedings.

4    The claims by the plaintiffs in each of the Directors’ Proceedings against all defendants other than Palentia have been resolved by settlements concluded in February 2011. With the exception of Palentia, all of the claims by the plaintiffs against the defendants in the Directors’ Proceedings have been dismissed or discontinued as a result of those settlements. Difficulties have arisen in discontinuing against Palentia because it is a company currently without a director. Whilst it has a registered office, the company has no place of business and is not readily contactable.

5    The application for leave to discontinue against Palentia is made by way of notice of motion filed on 25 May 2011 and supported by:

    affidavits sworn by Christopher John Connor on 16 and 25 May 2011;

    an affidavit of service affirmed by Scott Bradley Cummins on 12 May 2010; and

    an affidavit of service affirmed by Frances Mary Willis on 25 May 2011.

6    Mr Connor is a partner in the firm of Johnson Winter & Slattery, the solicitors for the plaintiffs in this and the other proceedings and for the Australian Securities and Investment Commission (‘ASIC’). Ms Willis and Mr Cummins are employees of the same firm.

7    Copies of company searches for Palentia were exhibited to Mr Connor’s first affidavit. These company searches showed the following:

(a)    the registered office of Palentia is at MGI-Boyd, Level 9, 16-18 O’Connell Street Sydney.

(b)    there are currently no appointed directors of Palentia. Mr Neil Burnard and Mr Craig Burnard are former directors, and Mr Craig Burnard is the current Secretary of Palentia.

(c)    the sole shareholder of Palentia is Noranel Pty Limited (‘Noranel’), the registered office of which is also at Level 9, 16-18 O’Connell Street, Sydney.

(d)    the sole director of Noranel is Ms Jennifer Robins.

8    Mr Connor deposed that he knew Ms Robins to be the spouse of Mr Neil Burnard. Mr Connor also stated that, on 6 May 2008, Mr Neil Burnard (then the sole director of Palentia) was convicted on nine criminal charges following an ASIC investigation relating to the Westpoint group of companies. Mr Burnard was disqualified from holding office as a director of a corporation for a period of five years.

9    In first affidavit, Mr Connor set out some of the history to the litigation. In particular, Mr Conner said that Palentia had previously been named as a defendant in liquidators’ proceedings No VID 351 of 2007. Palentia had entered an appearance in those proceedings in which it had been represented by Ms Lisa Wright of Atanaskovic Hartnell Solicitors. Mr Connor deposed that Palentia is no longer represented by that firm.

10    As a result of the judgment in Carey v Australian Securities & Investment Commission (2008) 247 ALR 772, the liquidators’ proceedings were discontinued. Amongst other things, this judgment included orders in substance providing that the costs of the liquidators’ proceeding be costs in Proceeding No VID 484 of 2008 (one of the Directors’ Proceedings) and that:

the plaintiff pay the defendants’ costs thrown away by reason of the proceeding having been discontinued provided however that in assessing such costs the Registrar shall have regard to the extent to which such costs and expenses incurred in this proceeding, and the work to which those costs and expenses relate, will benefit the defendants in proceeding No VID 484 of 2008.

11    ASIC began the Directors’ Proceedings thereafter but has not served any initiating process on Palentia. Palentia has not entered an appearance in this proceeding or in any other of the Directors’ Proceedings. Mr Connor deposed that “[n]o active steps have been taken in the Directors’ Proceedings against Palentia since they were commenced in 2008”.

12    In his first affidavit, Mr Connor set out the steps that he had taken to contact Palentia and inform its representatives of the proposal to discontinue the proceeding. Mr Connor stated that he had telephoned Palentia’s former solicitors and written to Ms Wright of Atanaskovic Hartnell, Palentia, Mr Craig Burnard, and Ms Robbins (Director of Noranel). All letters were relevantly in the same terms. Mr Connor said that he had not received any response to these letters.

13    The letter to Palentia relevantly read as follows:

Proposed Discontinuance of Westpoint Proceedings

We act for the Australian Securities & Investment Commission (ASIC) in relation to certain proceedings (the ASIC Proceedings) commenced in the Federal Court of Australia in 2008 and 2009 by ASIC using its powers under Section 50 of the Australian Securities & Investments Commission Act 2001 in the names of the following Westpoint companies:

…

Palentia ... is named as a defendant in the ASIC proceedings. It was not however ever served with those proceedings and has not entered an Appearance or taken any active steps in the litigation.

On 1 February 2011, ASIC concluded settlements of the claims made by the plaintiffs in the ASIC Proceeding (and other related proceedings), which has resulted in all of the claims by the above plaintiffs against all other defendants either being discontinued or dismissed with no order as to costs.

ASIC proposed to make an application to the Court in the near future for orders to discontinue the above proceedings against Palentia ... on the basis that there is no order as to costs including reserved costs.

The purpose of this letter is to ascertain whether Palentia ... has any objection to that course being taken to dispose of the ASIC Proceedings.

We note that:

1.    Palentia ... does not currently appear to have any directors appointed but that Mr Craig Burnard is named as the current Secretary of the company. Mr Neil Burnard was formally a director of Palentia ... A copy of this letter has been sent to Mr Craig Burnard.

2.    The sole shareholder of Palentia ... is Noranel Pty Ltd, the sole director of which is Ms Jennifer Robins. For that reason a copy of this letter has been sent to Noranel Pty Ltd.

3.    The ASIC Proceedings listed above followed earlier proceedings No VID 351 of 2007 commenced by the liquidators of Ann Street Mezzanine Pty Limited and York Street Mezzanine Pty Limited against a number of parties which included Palentia ... (the Liquidators’ Proceeding). In relation to this:

(a)    We note that Palentia ... had entered an Appearance in the Liquidators’ Proceeding and was represented by Ms Lisa Wright of Atanaskovic Hartnell. We understand that Ms Wright and Atanaskovic Hartnell no longer act for the company.

(b)    The Liquidators’ Proceeding was discontinued in 2008. That discontinuance occurred on the basis of Orders made on 8 August 2008 by His Honour Justice Finkelstein of the Federal Court in Melbourne. A copy of those Orders are attached. You will see that these provide in substance that:

(i)    the costs of the Liquidators’ Proceedings be costs in proceeding VID 484 of 2008 (being one of the ASIC proceedings); and

(ii)    the plaintiffs pay the defendants’ costs thrown away by the discontinuance provided however that such costs should be assessed having regard to the extent to which such costs were incurred or relate to work which will benefit the defendants in proceeding VID 484 of 2008.

4.    The writer spoke recently with Ms Wright of Atanaskovic Hartnell who informed us that, while she no longer acted for Palentia ... she was informed that Ms Robbins and Mr Neil Burnard had no objection to the discontinuance of the ASIC Proceedings against Palentia ... with no order as to costs. For that reason a copy of this letter has been sent to Ms Wright.

In the circumstances, please let us know by return whether Palentia ... has any objection to the discontinuance of the ASIC Proceedings with no order as to costs including reserved costs.

If we do not hear from the company or anyone on its behalf by 15 April 2011, we propose to proceed on the basis that there is no objection to the proposed orders and make an Application to the Court accordingly.

If you have any queries in relation to the above, please do not hesitate to contact the writer.

14    In his affidavit, Mr Cummins set out the steps taken to serve the letters upon the relevant addressees. In Palentia’s case, the letter was left at the company’s registered office. I note that the courier asked to deliver the letter to Mr Craig Burnard at his last known address was unable to deliver the letter to him since Mr Burnard was apparently no longer resident at that address.

15    In his second affidavit, Mr Connor produced a further company search of Palentia confirming that there had been no relevant change to the details set out at [7] above. Ms Willis confirmed that the notice of motion returnable today, with Mr Connor’s affidavit of 16 May 2011 and Mr Cummins affidavit of 12 May 2011 had been served on Palentia by being left at its registered office.

CONSIDERATION

16    Order 22 Rule 2(1)(d) of the Rules provides that a party making a claim for relief may discontinue “at any time – with the leave of the Court”. Generally speaking, the Court will grant an application for leave to discontinue, since it is undesirable that an applicant be compelled to continue litigation against the applicant’s will. That said, leave is not granted as a matter of course: see Harvey Norman Holdings Ltd v Fels [2002] FCA 13 at [5] citing Trade Practices Commission v Manfal (No 3) (1991) 33 FCR 382 (‘Manfal’) at 383-4. In Manfal Lee J stated, at 383 – 384:

It may be accepted that an application for leave to discontinue proceedings against a respondent will normally be granted. However, that does not mean that such an order is granted as a matter of course. ...

The discretion to grant leave is unfettered. … The court will give consideration to the need to refrain from compelling a party to litigate against its will but will also consider the extent to which the proceedings have developed and whether discontinuance against one respondent may impose injustice on another respondent by removing an advantage that respondent may otherwise enjoy in the proceedings or by imposing a disadvantage. In considering the undesirability of an applicant being forced to continue litigation unwillingly, it is relevant to have regard to whether the discontinuance would make any difference to the burden of litigation undertaken by the applicant and whether the application to discontinue results from the conclusion that the litigation cannot succeed against that respondent or is inspired by other reasons.

The requirements of the Federal Court Rules that, in the absence of consent of all parties, discontinuance of litigation against a party only be permitted by leave of the court contemplates a judicial review of all relevant circumstances and the satisfaction of the court that the grant of leave is proper in all the circumstances. In some cases the court may determine that a grant of leave to discontinue should be attended with conditions and in a rare case the court may determine that the only appropriate order is to refuse the leave sought. [citations omitted]

17    There is nothing here to indicate that Palentia will suffer any injustice or be deprived of an advantage already gained in the litigation (cf: Covell Matthews & Partners v French Wools Ltd [1977] 2 All ER 591 at 593) if the litigation is discontinued. Having regard to all the circumstances as disclosed to the Court, including Palentia’s circumstances and that the plaintiff in this proceeding and the plaintiffs in the eight related proceedings no longer have live claims against the other defendants, there would appear to be virtually no point in continuing to pursue claims against Palentia. The plaintiff should have the leave it has sought to discontinue the claims made against Palentia in this and each of the eight other related proceedings.

18    The plaintiff seeks an order that there be no order as to costs. This is the usual order where proceedings are discontinued in a case involving no hearing on the merits in circumstances like the present: see, for example, Ann Street Mezzanine Pty Ltd v KPMG [2011] FCA 453 and Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625. There is nothing before me that would indicate that a different order might be appropriate.

19    I would therefore grant the plaintiff in this proceeding and in each of the other eight proceedings previously mentioned leave pursuant to Order 22 Rule (1)(d) of the Rules to discontinue its claim against Palentia Pty Ltd. There will be an order that there be no order as to costs (including any reserved costs).

Associate:

Dated:    3 June 2011

SCHEDULE OF PARTIES