Ao Qing Investment Pty Ltd v 52 Lord St East Perth Pty Ltd

1. For the purposes of today's hearing, and pursuant to s 47B of the Federal Court of Australia Act 1976 (Cth), counsel for the plaintiff and counsel for the defendants are permitted to deliver oral submissions by way of video link.
2. The case management hearing and the plaintiff's interlocutory application filed 21 June 2023 are adjourned to 2.15 pm AWST on 4 October 2023 at the same time as proceeding WAD 286 of 2020.
3. Liberty to apply.
4. Costs in the cause. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKSON J: 1 The background and some of the history of these proceedings are outlined in two prior decisions: Ao Qing Investment Pty Ltd v 52 Lord St East Perth Pty Ltd [2022] FCA 743 (Ao Qing (No 1)); and Ao Qing Investment Pty Ltd v 52 Lord St East Perth Pty Ltd (No 2) [2023] FCA 293. In two separate sets of orders, the Court appointed receivers to the defendants, Pindan Capital East Perth Pty Ltd (PCEP) and 52 Lord St East Perth Pty Ltd. In broad terms, those appointments were made in order to help ensure that the sale of 52 Lord St's main and, quite possibly, only asset, a commercial property in East Perth, could proceed to completion, and that the sale proceeds (net of fees and a mortgage debt) could be secured, pending further developments. 2 The settlement of the sale of that property occurred on 31 March 2023. Since then, there has been little activity in this proceeding, but two recent developments have brought a question before the Court as to how the matter should go forward. Those two developments were: (a) the filing by the receivers, and companies under their control in the Pindan Group, of an interlocutory application in extant proceedings in the Supreme Court of Western Australia, seeking a declaration as to the enforceability of a document styled 'Settlement and Release Deed - Commercial', which is dated 5 August 2022 and which (at least on the receivers' account of events) was executed on 20 September 2022 (Settlement Deed); and (b) the filing by the plaintiff, Ao Qing Investment Pty Ltd, in this proceeding, of an interlocutory application also seeking, as primary substantive relief, a declaration in relation to the enforceability of the Settlement Deed. 3 The Settlement Deed effects, or at least purports to effect, a resolution of the disputes underlying this proceeding. The position of the receivers and the defendants under their control, however, is that the deed is not enforceable, and they seek a declaration along those lines in the Supreme Court proceeding. Conversely, the position of Ao Qing is that the deed is valid and enforceable, and it seeks a declaration to that effect in this proceeding. 4 It is common ground that: (a) the underlying subject matter of the dispute raised by the two applications of 20 and 21 June 2023 to which I have referred is the same - essentially, the legal enforceability of the Settlement Deed; and (b) that each of the Supreme Court and this Court has jurisdiction to determine that dispute. 5 In relation to the latter point, I accept that the Federal Court does have jurisdiction, that being a matter of which the Court always needs to satisfy itself regardless of the position of the parties. The jurisdiction arises because the dispute concerns the resolution of the matter which has previously been before the Court, where there was no doubt that the Court had jurisdiction over that matter. As a result, the determination of the validity of the deed is at least part of a determination of the justiciable controversies that underlay the proceeding: see Needlework Warehouse Pty Ltd v Chansonette Pty Ltd [2005] FCA 1525 at [44]. 6 That being so, this Court is faced with the position that there is currently an application in the Supreme Court to determine the very same matter as has been brought in this Court. The respective parties, in effect, each wish to pursue the applications that they have respectively commenced. As far as the proceeding in this Court is concerned, that means that the defendants now seek a stay of Ao Qing's interlocutory application so that they can pursue the Supreme Court proceedings, while Ao Qing seeks orders programming its application in this Court to a hearing. In the Supreme Court, the receivers seek interlocutory relief to join 52 Lord St and PCEP to that application. If they are successful in that regard, Ao Qing foreshadows that it may seek orders in the Supreme Court for a stay and/or the striking out of the interlocutory application in that court. 7 Two further matters in relation to the Supreme Court proceeding need to be described: first, that although Ao Qing has been given notice of the interlocutory application in that proceeding, it is not presently a party to it, and there is at present no application by the receivers or the companies they have been appointed over to join it as a defendant; and second, that the receivers' application in that proceeding has been listed for a hearing on 20 July 2023. 8 As to the first of those matters, while it is for the Supreme Court to decide whether the proceeding before it is properly constituted, it does appear that there could be a difficulty for the receivers in the enforceability of any orders they might obtain in that proceeding to the detriment of Ao Qing: see News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 524, 526. Perhaps with that in mind and, with respect, sensibly, the receivers have given an undertaking through their counsel that they will apply by close of business today for the joinder of Ao Qing to the Supreme Court proceeding. 9 Against that background, as I have said, the receivers and the defendants submit that the interlocutory application in this proceeding should be stayed because it is an abuse of process, in that it duplicates the application that had already been made in the Supreme Court proceeding, albeit only one day before. The receivers point in that regard to several indications they made in affidavits and correspondence of their intention to bring an application of that nature in the Supreme Court. 10 The receivers submit that this Court should not 'leapfrog' a Supreme Court application which is presently on foot, and should not permit that duplication of proceedings. The receivers also submit that although, in broad terms, the Settlement Deed provides for a simple 50-50 split between Ao Qing and one of the defendants, PCEP, of the net proceeds of the sale of the land, in fact the distribution of funds will not be as simple as that, even if the deed does prove to be enforceable. That is because there may be other claims by other companies in the Pindan Group on at least some part of those proceeds. The receivers submit that issues of that nature have already been the subject of directions made by or sought before the Supreme Court, so that court has familiarity with those issues in the context of the insolvency administrations of the wider Pindan Group. That is another reason why, in the submission of the receivers, the matter should proceed in the Supreme Court and not in this Court. 11 On the face of things, and without considering at this point the submissions of Ao Qing, which of course I will do shortly, there is practical force in the receivers' submission that there is a duplication of proceedings, and where the Supreme Court has been seized of the matter, and has already set it down for a hearing within a relatively short period of time, that process should proceed. There is also force in the point made about the possible need for further directions to be made about the distribution of funds beyond the simple 50-50 split sought by Ao Qing, and I note that senior counsel for Ao Qing did not make any submission to contradict that particular point. 12 Nevertheless, Ao Qing submits that the dispute should proceed in this Court because it says it is not an abuse of process and the Court is already seized of the matter and already has familiarity with the underlying dispute. 13 It is not an abuse of process, Ao Qing submits, because all Ao Qing has done is to bring an application by motion in this proceeding, which was already on foot, to resolve the outcome of this proceeding. It proposes to do so by way of what Ao Qing submits should be a simple enforcement of the Settlement Deed, that deed having been entered into (at least on Ao Qing's submission) in order to resolve the disputes that were already before this Court. This Court has been seized of the wider disputes between Ao Qing and PCEP for a long time. 14 I was taken to evidence of correspondence between the solicitors for the parties which led up to the two applications, and I was pointed to emails that are said to explain why Ao Qing did not make its application until 21 June 2023, shortly after the application was made by the receivers on 20 June 2023. However I do not see a need to go into that correspondence at this point, because I do not propose to resolve the present questions of any stay and/or appropriate programming orders on the basis that Ao Qing's application is an abuse of process. That would be a serious matter to find, and in my view, it is simply not necessary to determine in order to make orders that provide for the dispute about the validity of the Settlement Deed to be resolved as fairly and expeditiously as possible. I therefore place no weight for present purposes on the parties' different contentions about which application was commenced first, and why that was so. 15 The practical reality, as was properly acknowledged by senior counsel for Ao Qing, is that there is an application in front of the Supreme Court which, if it does proceed to completion, will resolve the dispute about the enforceability of the Settlement Deed. While that is subject to the observations made earlier that Ao Qing is not presently a party to that proceeding, as I have indicated the receivers propose to take immediate steps to rectify that position. That being so, it appears to me that the present question is not whether there is an abuse of process and whether a stay is appropriate on that basis, but simply what is the best way for the dispute between the parties about the validity of the deed to be resolved in accordance with efficient case management principles. 16 When the matter is framed that way, it does appear to me that there is little to be said for the proposition that this Court is better placed to resolve the matter expeditiously than the Supreme Court. It is already listed for hearing in front of the Supreme Court within quite a short period of time. Again, while it will be completely a matter for that court, there is a possibility, given the extent of the issues that are potentially in dispute, that the hearing may not be completed on that date. I say that because, while there were no pleadings to which I could be taken, I was informed from the bar table that the two main grounds on which the receivers say that the Settlement Deed is not valid and enforceable concern non-fulfilment of alleged conditions precedent in the shareholders' agreement governing 52 Lord St, and questions as to whether directors who executed the deed had proper authority to do so on behalf of the relevant companies. So there is a possibility that these grounds will give rise to factual disputes which may take longer than a day to determine. But that is neither here nor there for the purpose of the decision that I presently have to make. Either the Supreme Court will be in a position to determine those issues after the hearing on 20 July 2023, or it will not, but either way it does not follow that this Court will be in a position to resolve it any more quickly than that. In view of the current commitments of the Western Australian Registry of this Court, it is unlikely that any hearing, whether of a day or longer, will occur by July. 17 That being so, it appears to me that the only real reason why it might be thought that this Court is better placed to resolve the dispute than the Supreme Court is that this Court does have prior history in relation to the disputes between the parties that purportedly have been resolved by the execution of the Settlement Deed. Nevertheless, I do not consider that that is a strong reason. The underlying disputes that have allegedly been settled were essentially disputes between two shareholders of 52 Lord St, which was a vehicle for the development and, ultimately, realisation by sale of a commercial property to which I have referred. While the Court has had some exposure to those disputes, it has had little, if any, exposure to the Settlement Deed or any issues that might arise as to its enforceability or validity. I have just outlined in very broad compass what I understand to be the nature of the grounds that will be pursued in that regard, and there is little, if any, evidence before this Court at the moment that would give it any familiarity with the facts underlying those grounds. 18 It is true, as Ao Qing submits, that if the outcome of the application for declarations concerning the validity of the Settlement Deed is that it is held not to be enforceable, then those underlying disputes, of which this Court was previously seized, may need to be resolved, conceivably by proceeding to a full trial. But once again that is neither here nor there in terms of the efficiency of the validity of the Settlement Deed being determined by the Supreme Court. Neither party has made any suggestion that it would be appropriate or efficient for the entire matter to be heard by this Court, that is, both the validity of the Settlement Deed and the underlying disputes at the same time. It is quite clear that this would not be efficient at all, given the potentially broad ranging nature of the underlying disputes (as outlined in Ao Qing (No 1)). Those disputes have not since then been programmed any closer to a hearing or other resolution, largely because the parties were aware of the existence of the Settlement Deed and sensibly decided to prioritise the completion of the sale of the property. 19 For those reasons I do not consider it appropriate to make any order today to stay the proceeding, whether on the basis of abuse of process or otherwise. It appears to me that the best way to proceed from the viewpoint of pragmatism and efficiency is simply to adjourn the proceeding to a date after 20 July 2023, where either the hearing will have proceeded in the Supreme Court, or it may be that the Supreme Court application has had to be programmed to hearing at some later time. Either way, this Court will be better placed to assess the status of that proceeding and the dispute, and so determine any appropriate programming orders to be made after that time. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.