FEDERAL COURT OF AUSTRALIA

Pennicott Wilderness Journeys Pty Ltd v Bruny Island

Adventure Cruises Pty Ltd (in liquidation) [2013] FCA 282

THE COURT ORDERS THAT:

1.    In the application of the Applicant for enforcement of the Court’s orders of 23 August 2012 as against Carol Ann Jeffrey and Kevin Pearce, Carol Ann Jeffrey and Kevin Pearce make discovery of and supply to the Applicant for inspection the following classes of documents on or before 19 April 2013:

    documents supportive of their case;

    documents supportive of the Applicant’s case;

    documents adverse to their case;

    documents adverse to the Applicant’s case.

2.    The Application of the Applicant for leave to proceed under s 500(2) of the Corporations Act 2001 (Cth) and for consequential orders is refused.

3.    The costs of Ms Carol Ann Jeffrey and Mr Kevin Pearce of today be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 9 May 2012 the applicant, Pennicott Wilderness Journeys Pty Ltd (“Pennicott”) commenced a proceeding against Bruny Island Adventure Cruises Pty Ltd (“BIAC”). Pennicott sought relief against BIAC, amongst other things, under the Australian Consumer Law and for the tort of passing off. On 23 August 2012, on the first morning of a scheduled two day contested hearing, the parties signed consent orders to resolve the substantive proceeding. The Court gave effect to the consent of the parties and made orders, including restraining orders, against BIAC and orders compelling it to take certain action.

2    On 5 September 2012, Pennicott filed an interlocutory application seeking enforcement of the consent orders of 23 August 2012. On 30 November 2012, Pennicott filed an amended interlocutory application in which it sought orders including the following:

    orders for the committal of the sole director of BIAC, Ms Carol Ann Jeffrey and the Manager of BIAC, Mr Kevin Pearce;

    an order for “the sequestration of the property of the respondent company for the breaches of the consent orders in this action”;

    an order that the respondent pay the costs of the application;

    other orders or directions pursuant to Rule 41.01 of the Federal Court Rules 2011 as the Court sees fit.

Particulars of the alleged breaches were then set out.

3    The hearing of the amended interlocutory application was listed for 30 January 2013. At the commencement of the hearing, counsel informed the Court that, on 24 January 2013, BIAC had been wound up voluntarily and that a liquidator had been appointed. The Court was informed that Ms Brooks of Sellers Muldoon Benton Chartered Accountants was appointed as liquidator. Counsel told the Court that Ms Brooks had been informed of the hearing but had chosen not to attend that day.

4    In light of the events referred to in the preceding paragraph, counsel for Pennicott made an oral application for leave pursuant to s 500(2) of the Corporations Act 2001 (Cth) (“the Act”) to proceed with that portion of the amended interlocutory application which concerned BIAC. Counsel was not prepared to advance his application upon it being made. The hearing of it was adjourned to 31 January 2013 and later, to today. With the agreement of counsel for Ms Jeffrey and Mr Pearce, the amended interlocutory application, insofar as it concerned those individuals was adjourned to 30 May 2013.

5    The order sought against BIAC in the amended interlocutory application is (using the words of r 41.08 of the Federal Court Rules) for “the sequestration of the property” of the respondent. One may wonder as to the utility of making such an order in respect of a company which is already in liquidation. In Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 at [21] Besanko J said:

The fact that the company is insolvent and will not be able to satisfy a judgment is a factor against the grant of leave….because the Court will not give its imprimatur to fruitless proceedings.

6    A non-exhaustive summary of the matters which may affect the exercise of the Court’s discretion under s 500(2) of the Act was set out by Zeeman J in the Supreme Court of Tasmania in Oceanic Life Ltd v Insurance & Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516. Justice Dodds-Streeton recently applied those factors in this Court in La Trobe Wholesale Finance v KCRAM Pty Ltd (in liq) (No 1) [2012] FCA 1388.

7    The four most relevant matters affecting the exercise of the discretion, as referred to in Oceanic Life are:

1.    whether there is a substantial question to be tried;

2.    whether the action would interfere with the ordinary winding up of the respondent;

3.    whether the action would serve any sufficient purpose;

4.    whether the action would have any adverse effect upon the respondent or its shareholders.

8    The most relevant of the above factors for current purposes is the third one. It is difficult to see how an application pursuant to r 41.08 for sequestration of the property of a company which is already in liquidation can serve any purpose, let alone any sufficient purpose. I acknowledge the existence of a substantive question to be tried as to the failure of BIAC to comply with orders of the Court. I also acknowledge that the remaining two factors referred to in Oceanic may be neutral. However, in reliance on the observations of Besanko J in Viscariello, the Court considers that the grant of leave to Pennicott to pursue BIAC with the view to seeking sequestration of its property would be a “fruitless exercise”. Accordingly, the Court refuses to grant leave for Pennicott to proceed with that part of the amended interlocutory application which seeks relief against BIAC. The amended interlocutory application will proceed insofar as it concerns Ms Jeffrey and Mr Pearce, in the absence of resolution of the issues between Pennicott and those persons in advance of that future hearing.

9    Any issue the applicant has about the conduct of the liquidation should be governed by ordinary processes available to creditors under the Act.

10    The Court has made orders this morning by consent for discovery by Ms Jeffrey and Mr Pearce. The Court expects those orders to be complied with. In the event of non-compliance, the applicant may move on short notice for the amended interlocutory application to proceed on an undefended basis.

Associate:

Dated:    28 March 2013