Consolidated Byrnes Holdings Ltd ACN 111 052 585 v Hardel Investments Pty Limited ACN 083 267 000

REASONS FOR JUDGMENT 1 These two proceedings have been listed for hearing this morning. 2 Something needs to be said about the history of both matters which is identical. 3 On 28 March 2008 the plaintiffs issued these proceedings in the New South Wales Registry seeking the winding up of the two defendants in the separate proceedings in insolvency pursuant to s 459P of the Corporations Act 2001 (Cth) (the Corporations Act). In both proceedings the plaintiffs relied upon the failure of the two defendants to comply with a statutory demand. 4 On 28 April 2008 both defendants filed a notice of appearance identifying the grounds of opposition to the application for winding up. 5 On 4 June 2008 Gyles J made an order transferring the proceedings to the South Australian Registry. 6 On 27 June 2008 the proceedings came on before me for directions when the plaintiffs were represented by counsel who appeared by video conference. The defendants were represented by senior and junior counsel. Four discrete issues arising out of grounds of opposition were identified by the parties as needing to be determined as preliminary issues. 7 On that occasion I gave directions as to the filing of affidavit evidence in support of the plaintiffs' application and in support of the defendants' opposition. The plaintiffs were to file their affidavits by 1 August 2008 and the defendants to file any affidavits in reply by Friday, 8 August 2008. I ordered the plaintiffs to file their written submissions by Friday, 15 August 2008 and the defendants to file and serve their written submissions by Wednesday, 20 August 2008. I adjourned the matter for the hearing of those four preliminary issues to 10.00 am on 25 August 2008. 8 I have been supplied with correspondence which shows that on Friday, 22 August 2008 the plaintiffs' solicitors wrote to the defendants' solicitors noting that the defendants were in the process of settling approximately $9 million in property sales over the next two weeks. They advised that this could assist in the resolution of the matter and wrote "we are therefore of the view that Monday's hearing should be adjourned to enable this to take place." They advised that they had been instructed to request an adjournment for a period of eight weeks. 9 At 2.49 pm on the same day, the plaintiffs' solicitors, by email, attaching a copy of the letter to which I have just referred, wrote to my Associate advising they would be requesting an adjournment and advising, "[o]ur client's (sic) are of the opinion that this would be more beneficial to them than having any action taken against the Respondents' (sic) at this stage". They sought to appear by video conference on Monday, 25 August 2008 rather than having to appear in Adelaide to make that request. The plaintiffs' solicitors did not indicate whether the application would be opposed. My Associate ascertained from the defendants that the application for the adjournment would be opposed and the plaintiffs' solicitors were advised that, in those circumstances, the plaintiffs needed to appear in Adelaide rather than by video conference. The plaintiffs' solicitors advised that Adelaide counsel would be retained for the purpose of making the application. 10 In an exchange of emails between the plaintiffs' and the defendants' solicitors, the plaintiffs' solicitors complained about the defendants failure to comply with the directions made by me on 27 June 2008. The defendants' solicitors addressed the plaintiffs' complaint and set out both parties' responses to my directions, given on 27 June 2008, and said: On 27 June 2008, your clients were ordered to file any affidavits by 1 August 2008 and submissions by 15 August 2008. Your clients were very late in service of their further affidavits. We received the affidavit of James Byrnes (sworn 12 August 2008) on 12 August 2008, and the affidavit of Elizabeth Low (sworn 13 August 2008) on 13 August 2008. Our clients served its (sic) two further short affidavits on 21 August 2008 (at 12.36 pm) and 22 August 2008 (at 11.17 am), only one or two days after the time that had been previously allowed on the orders of Justice Lander (which you had failed to comply with by nearly two weeks). Our clients were entitled to wait until they had received all of your clients' evidence before deciding what further material they required. We reject that our clients have been tardy. To the contrary, your clients have once again failed to comply with orders for the filing of evidence. In relation to the submissions, we received your clients' Outline of Argument on Monday, 18 August 2008, three days late. It was envisaged that we would have five days to respond on his Honour's timetable. We provided with you (sic) our submissions in a shorter time than was envisaged. We deny that your clients have been embarrassed by the filing of the two further short affidavits of Ms Vozzo and Mr Pridmore. 11 On 25 August 2008 the plaintiffs' solicitors wrote to my chambers with a copy to the defendants' solicitors in the following terms: You have already heard from my office regarding the property sales that the Respondents' (sic) are in the process of completing in Queensland. It is our clients' view that an appointment of a liquidator to the Respondent companies will have a seriously deleterious effect on the standing of the unsecured creditors. That in itself is a valid reason to seek an adjournment today, however there are other matters that have had a serious impact on our position. 12 The plaintiffs' solicitors then dealt with the defendants' responses to my directions. Their letter concluded in the following terms: My office had already put a request to the Respondents' lawyers seeking to adjourn proceedings to allow the property settlements to take place. Last night, on returning to my office and seeing the emails, I put a further request to Johnson Winter and Slattery advising them that we were unable to respond to their material in the limited time left to us and that as a consequence we were embarrassed. My office did request a Video teleconference this morning to make the foreshadowed adjournment application. As our clients' (sic) took the decision on Friday night not to incur considerable expenditure in travelling to Adelaide I would like the opportunity to be heard in relation to matters raised herein. 13 The plaintiffs' solicitors were well aware on the afternoon of Friday, 22 August 2008 that the Court would not arrange for the plaintiffs' counsel to appear by video conference. There were two reasons why the Court took that position. The first and more important reason was that to allow the plaintiffs to appear by video conference for the purpose of seeking an adjournment would rather assume that the application would be successful. That assumption could not and should not be made in circumstances where the defendants had indicated they would be vigorously opposing the application. The second reason was that the Court became aware that the plaintiffs' solicitors had failed to comply with an undertaking they gave to the Court to make payment for the video conference fees of 27 June 2008. A number of requests had been made by the Registry staff to the plaintiffs' solicitors requesting payment of that fee but the fee remained unpaid as at 25 August 2008 and I am told, this morning, still remains unpaid. 14 When the matter came on for hearing on 25 August 2008, the plaintiffs were represented by Adelaide counsel, Mr Michael Burnett. He applied, on behalf of the plaintiffs, for the adjournment of the proceedings on the ground that the defendants had failed to comply with the directions given on 27 June 2008. 15 I indicated that I would not adjourn the proceedings on that ground. As the defendants' solicitors' letter of 24 August 2008 explains, and as counsel for the defendants, Mr Whitington QC, contended, any failure by the defendants to comply with those directions was in part, if not completely, due to the failure by the plaintiffs to earlier comply with my directions. 16 It was contended by Mr Burnett that the defendants would suffer no prejudice by the matter being adjourned. The defendants took issue with that contention. I rejected Mr Burnett's contention because, clearly, it is the case that a company which is the subject of an application for winding up in insolvency would suffer prejudice until such time as the application is determined. 17 Mr Whitington QC also argued that the plaintiffs' statement that it was not in the best interests of the unsecured creditors to appoint a liquidator would appear to be at variance with the plaintiffs' application to appoint a liquidator. Clearly, he was right about that. Moreover, I accepted his contention that the plaintiffs' proceeding had the appearance of being a debt collecting proceeding rather than a genuine application under s 459P of the Corporations Act. 18 However, notwithstanding, I advised the plaintiffs' counsel that I would adjourn the matter until Wednesday, 27 August 2008 to allow the plaintiffs to consider the defendants' evidence and submissions. I had earlier indicated I would have adjourned the matter until Tuesday, 26 August 2008 but I was told by the plaintiffs' counsel that the principal witness in the case, Mr Byrnes, who has filed affidavits in support of the plaintiffs' application, and who has been requested to be available for cross-examination, would not be available on Tuesday. In those circumstances, I adjourned the matter until today. 19 I made an order that the defendants have their costs on an indemnity basis but left it open as to who would be responsible for those costs for further hearing today. 20 On the afternoon of Tuesday, 26 August 2008 the Court received a notice of discontinuance in both proceedings. The notice, on its face however, was incompetent. Order 22 rule 2(3) of the Federal Court Rules provides that an application for a winding up order under s 459P may not be discontinued without leave of the Court. No leave had been sought or been given. 21 The plaintiffs' solicitors were advised that the matter would remain listed for hearing today. This morning my chambers was provided with an email from the plaintiffs' solicitors to the defendants' solicitors advising "[w]e are agreeable to dismiss the proceedings and costs as agreed or assessed." My chambers sought details of the proposed costs orders and was advised by the plaintiffs' solicitors: Our suggestion as to costs would be indemnity costs for Monday and Tuesday with party party costs for the remainder of the proceedings. These costs to be agreed or assessed if not agreed. As to who should pay the costs we would submit the Applicants. As lawyers and Counsel we unfortunately do not control our client's (sic) decisions and act on instructions. I renew and repeat my apologies to the Court for the inconvenience. I have just been informed by Mr Burnett that he is not available today. 22 My chambers responded advising the plaintiffs' solicitors that if Mr Burnett was not to appear, and no alternative counsel was available, then the plaintiffs would be unrepresented. It was pointed out to the plaintiffs' solicitors that it was not appropriate for them to make submissions to the Court via email. They were advised, accordingly, that if the plaintiffs were to be unrepresented, the plaintiffs may need to reach an agreement with their opponents as to costs. 23 Five minutes before the hearing was due to commence my Associate was advised by email by the plaintiffs' solicitors: That is exactly what I want to do. I need Eve Thomson to agree or we need to have an alternative date to appear in front of His Honour and make submissions as per my email. Ms Thomson is a solicitor employed by the defendants' solicitors. 24 When the matter was called on today, the plaintiffs did not appear even though called in the precincts of the Court. In those circumstances, no application was made to me by the plaintiffs for leave to discontinue in accordance with O 22 r 2(3). 25 Mr Whitington QC applied to have both proceedings struck out pursuant to O 32 r 2(1)(c). He asked for the costs of the proceedings and for the costs awarded on Monday to be reserved so that his clients could give notice to non-parties to the proceedings that an order for costs will be sought against them. He contended that it would be appropriate to make orders for costs against non-parties because the plaintiffs in these proceedings were bare trustees and any order for costs against them may not be able to be enforced. Moreover, he said he wished to advance an argument that the non-parties were responsible for the maintenance of these proceedings. 26 Clearly, having regard to the circumstances which I have addressed, these proceedings ought to be dismissed as sought. They ought to be dismissed because the plaintiffs themselves wish to have the proceedings brought to an end. However, they ought to be dismissed because the plaintiffs have not appeared, notwithstanding the opportunities which have been given to the plaintiffs over the last three days. 27 There will be an order that both proceedings stand dismissed. 28 The defendants have brought other proceedings against the plaintiffs in action number NSD 584 of 2008. That matter was not listed for hearing today but was to await the disposal of the four preliminary issues to which I have referred. Mr Whitington QC has indicated that it is the defendants' position (the plaintiffs in NSD 584 of 2008) that that proceeding also be brought to an end. There is no further utility in that proceeding because it mirrors the opposition to the plaintiffs' proceeding in these proceedings. It seems to me it would be appropriate, therefore, to list that matter for hearing at the same time as listing for hearing Mr Whitington's oral application for costs in these proceedings. 29 I will formally reserve the question of costs. For the avoidance of any doubt, I will also consider on the adjournment of the costs application as to who should be responsible for the costs thrown away in the orders made on Monday, 25 August 2008. I direct the defendants in the two proceedings before me today to give notice to any non-party against whom they seek an order for costs advising (1) the orders sought; and (2) the basis upon which the orders are sought by identifying the material facts upon which the defendants rely for those orders. I direct the defendants to provide me with a copy of those notices. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.