FEDERAL COURT OF AUSTRALIA

Kitay, in the matter of Computer Accounting & Tax Pty Ltd (in liq) [2016] FCA 720

ORDERS

THE COURT ORDERS THAT:

1.    The amended interlocutory process be set aside.

2.    The plaintiffs pay the liquidator’s costs of the plaintiffs’ amended interlocutory process and the liquidator’s interlocutory application, to be taxed if not agreed.

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

REASONS FOR JUDGMENT

BARKER J:

1    This proceeding was commenced by originating process in which Mrs Angela Cecilia Theresa Frigger and Mr Hartmut Hubert Josef Frigger, the plaintiffs (Mrs and Mr Frigger or the Friggers), seek an order, under s 482(1) of the Corporations Act 2001 (Cth), that the insolvent liquidation of Computer Accounting & Tax Pty Ltd (in liq) (company) be stayed or, alternatively, be terminated.

2    Then, by interlocutory application filed 20 January 2016, Mr Mervyn Jonathan Kitay, the liquidator of the company, applied to set aside the originating process, or alternatively, for summary judgment against Mrs and Mr Frigger. By way of further alternative, he sought security for costs.

3    While the final resolution of the originating process and the interlocutory application was adjourned pending the determination of the related proceeding in WAD 607 of 2015, Mrs and Mr Frigger filed an interlocutory process in this proceeding, purportedly under s 1321 of the Act, for the following further relief, as set out in that interlocutory process as amended by them:

1.    Pursuant to Federal Court (Corporations) Rules rule 14.1(3) an order extending the time for filing this interlocutory process to the date hereof;

2.    Pursuant to rule 20.35(1) Mr Mervyn Kitay produce to the court letters from Mr David John to Mr Mervyn Kitay dated 25 August 2010 and 16 September 2010 which letters were written for the sole purpose of obtaining the Supreme Court’s permission to obtain litigation funding which letters state that Mr Kitay would not be successful in his claim for the Armadale Property;

3.    An order declaring that the agreement between the parties in relation to the sale proceeds of the Armadale Property and the service station business dated 20 November 2015 and 26 November 2015 is void ab initio.

4.    Mr Mervyn Kitay liquidator of Computer Accounting & Tax Pty Ltd (in liq) is ordered to pay to the applicants the sale proceeds of the service station business operated by the applicants at 269 South Western Highway Armadale from 1 July 2009 to 11 February 2016 being $1,463,000 plus interest at 6%p.a. from 11 February 2016 until date of order.

5.    Mr Mervyn Kitay liquidator of Computer Accounting & Tax Pty Ltd (in liq) is ordered to pay to the applicants the selling costs of the property at 269 South Western Highway, Armadale in the agreed amount of $13,297.24 plus interest at 6%p.a. from 11 February 2016 until date of order.

6.    [Blank as in original.]

7.    Mr Mervyn Kitay liquidator of Computer Accounting & Tax Pty Ltd (in liq) is ordered to pay to the Frigger Super Fund the balance of the sale proceeds of the Armadale Property being $1,163,702.76 plus interest at 6%p.a. from 11 February 2016 until date of order.

8.    The applicants, as trustees of the Frigger Super Fund, give a written undertaking to this Court that the amount of $1,163,702.76 referred to in paragraph 6 hereof will not be dissipated other than in compliance with the requirements of the Australian Taxation Office as regulator of the Frigger Super Fund pending the resolution of Supreme Court of Western Australian CIV2765/2010.

9.    Mr Mervyn Kitay pay the applicants’ costs of this application.

4    On 1 June 2016, the liquidator then filed an interlocutory application for an order setting aside the amended interlocutory process on the ground of abuse of this Court’s processes; or, in the alternative, for security for costs.

5    Mrs and Mr Frigger’s amended interlocutory process under s 1321 and the liquidator’s interlocutory application of 1 June 2016 came on for hearing in the Court on 3 June 2016.

6    The essential question raised is whether Mrs and Mr Frigger’s amended interlocutory process should be set aside.

Should Mrs and Mr Frigger’s amended interlocutory process be set aside?

7    Section 1321(1) of the Act permits a person aggrieved by any act, omission or decision of, amongst other persons, a liquidator of a company to appeal to the Court in respect of the act, omission or decision and empowers the Court to confirm, reverse or modify the act or decision, or remedy the omission, as the case may be and make such orders and give such directions as it thinks fit.

8    Mrs and Mr Frigger by the amended interlocutory process seek to appeal what they say is a decision of the liquidator, being a:

refusal of the liquidator to sign the land transfer of the Armadale Property to Viva Energy Australia Pty Ltd unless the Friggers agreed to the sale proceeds of the Property and Business being paid to [the company] which decision wrongfully deprived Mr & Mrs Frigger the sale proceeds of the Armadale property being an asset segregated in Mr Frigger’s allocated pension, and the sale proceeds of the service station business representing internally generated goodwill by Mr & Mrs Frigger as operators and owners of the business. The was an abuse of power by the liquidator …

9    They also seek to appeal against:

[t]he demand by the liquidator that the Friggers sign an agreement to put into effect the decision … which agreement was procured by the liquidator by duress …

10    They also complain that the liquidator failed to obtain the approval of the Court before entering into the agreement just referred to, and say that a demand by the liquidator on Bankwest to withdraw the net sale proceeds of the service station business from the Friggers’ bank account and to deposit those proceeds to the company’s bank account by “falsely stating” to Bankwest that the funds belonged to the company, was an abuse of power by the liquidator.

11    The liquidator submits, first, that the appeal under s 1321 ought be made in the winding up proceedings, which are in the Supreme Court of Western Australia, but rather has been made in a separate proceeding in this Court which is designed to stay or indeed terminate the winding up, which is inappropriate. Secondly, the liquidator says the appeal under s 1321 is an abuse of process as it seeks to agitate issues which are already the subject of other, separate proceedings in the Supreme Court of Western Australia.

12    In my view, it is appropriate to focus on the abuse of process argument.

13    There is currently in the Supreme Court of Western Australia an action pending in CIV 2765 of 2010. What is in issue in those proceedings is the ownership of certain property in Armadale (referred to above as the Armadale property) and also as to the service station business conducted on that property.

14    The liquidator claims that both assets are owned by the company in its own right and therefore that they are assets available for the benefit of the creditors of the company. The liquidator notes that in yet another proceeding in the Supreme Court of Western Australia, a finding has already been made to that effect with respect to the Armadale property. See Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 at [89] (Simmonds J) (while Simmonds J’s assessment of damages was subsequently reduced by the Court of Appeal, this finding of fact was not disturbed. See Professional Services of Australia Pty Ltd and Another v Computer Accounting and Tax Pty Ltd (No 2) (2009) 261 ALR 179; [2009] WASCA 183). The liquidator also notes that, on the other hand, Mrs and Mr Frigger assert that the company owns the Armadale property as trustee for the Frigger Super Fund and that the service station business is owned by them in their own right.

15    It is plain from the written submissions that have been filed by Mrs and Mr Frigger and by the liquidator that there is no disagreement between the parties that there is such a legal contest between Mrs and Mr Frigger and the liquidator in these terms in proceeding CIV 2765 of 2010 in the Supreme Court. It is also correct to say that while Mrs Frigger, as advocate for Mrs and Mr Frigger on the hearing of their amended interlocutory process and the liquidator’s interlocutory application before me, confidently predicts a successful outcome in that proceeding, the matter is hotly disputed and seemingly some time away from resolution. While commenced in 2010, the proceeding is yet to be listed for trial. Plainly enough, factual and legal issues are likely only to be resolved following a trial.

16    It is also plain enough that by the appeal under s 1321 of the Act instituted by the amended interlocutory process in this Court, Mrs and Mr Frigger seek to agitate if not the same, then nearly identical issues to those pending in that Supreme Court action. While Mrs Frigger seeks to contend that at issue in CIV 2765 of 2010 is which party or parties has or have the legal right to the Armadale property and the service station business, and that what she and Mr Frigger seek by way of outcome on the appeal against the liquidator is release of sale funds currently held in an account by the liquidator, in truth and substance exactly the same issues are raised in each matter.

17    While Mrs Frigger and the liquidator have each put on affidavits to provide background facts to the present matter, the essence of the factual situation is as follows. A settlement of sale of the Armadale property and the service station business operated on it occurred on 11 February 2016. By prior letter agreement between Mrs and Mr Frigger and the liquidator, the bank cheque received at settlement in the sum of $1,330,000, being the balance of the purchase price payable under a business sale agreement, was to be deposited into a joint bank account opened in the name of the company with Bankwest. The liquidator agreed following settlement on this basis to transfer to Mrs and Mr Frigger the agreed selling costs incurred by them of $13,297.24.

18    Following further correspondence from the Friggers to the solicitors for the liquidator, the liquidator by his solicitors denied that the letter agreement to this effect, which had been made on 26 November 2015, was voidable on any basis. The solicitors said that it represented a sensible commercial outcome which protected the parties’ respective positions and facilitated the sale transaction pending conclusion of the Supreme Court proceeding.

19    The long and the short of the matter presently is, that the cheque was to be held in the account, set up for that purpose, pending the determination of the matters in issue in CIV 2765 of 2010.

20    This appeal, under s 1321 of the Act, is primarily founded on the same contentions that Mrs and Mr Frigger are currently maintaining in that Supreme Court proceeding.

21    While they also appear to wish to challenge the letter agreement, the Friggers’ substantive focus is on the allegations that the monies in question are not available to the creditors of the company in liquidation.

22    As noted above, Mrs Frigger endeavours to argue that the dispute she now wishes to develop in this Court in the amended interlocutory process should be characterised as a dispute about an entitlement to the proceeds of sale of the assets and so is different from a dispute about the title to the assets themselves which is pending in the Supreme Court action. But that is a distinction without a difference.

23    In these circumstances I consider the attempt made in this proceeding by Mrs and Mr Frigger by the amended interlocutory process, to litigate a question of entitlement to the funds currently held by the liquidator to be in substance and truth the same as the subject matter of the asset title dispute in CIV 2765 of 2010 currently pending in the Supreme Court. This present amended interlocutory process is but a diversion, and on the face of it a tactical diversion, to the maintenance and finalisation of the Supreme Court proceeding. It is quite inappropriate that Mrs and Mr Frigger should seek the relief they seek in the amended interlocutory process when they are already maintaining fundamentally the same proceeding in that Supreme Court action. To do so, is an abuse of process. See Moore and Others v Inglis (1976) 9 ALR 509.

24    At the conclusion of oral submissions, Mrs and Mr Frigger sought, in the alternative, orders transferring their appeal under s 1321 of the Act, to the Supreme Court proceeding in CIV 2765 of 2010. This request was repeated in unsolicited correspondence sent to the Court on 10 June 2016. The Court declines to order a transfer. The amended interlocutory process in this Court should be set aside for abuse of process. It is open to Mrs and Mr Frigger to make an application, if they think it is necessary, to pursue these issues in the Supreme Court proceedings.

25    In these circumstances, the liquidator is entitled to the primary relief sought, that the amended interlocutory process should be set aside as an abuse of process.

Order

26    For the reasons given above the appropriate orders should be:

(1)    The amended interlocutory process be set aside.

(2)    The plaintiffs pay the liquidator’s costs of the plaintiffs’ amended interlocutory process and the liquidator’s interlocutory application, to be taxed if not agreed.

Associate:

Dated:    17 June 2016