EMANUEL MANAGEMENT (IN LIQ) & ORS v FOSTERS & ORS No. SCGRG-98-411 Judgment No. S68 [1999] SASC 68

EMANUEL MANAGEMENT (IN LIQ) & ORS v FOSTERS & ORS No. SCGRG-98-411 Judgment No. S68 [1999] SASC 68 - SASC 1999 case summary — Zoe

[12]

In Part 4 of the Statement of Claim, the plaintiffs seek to set aside an arrangement which they allege was made between July 1993 and March 1995 which they call the "1995 scheme". The plaintiffs allege that an agreement or understanding was put in place between Mr Guiseppe Emanuele and his son Rocco, certain solicitors, and the Fosters finance companies by which, among other things, the lands in the Brisbane Northern Corridor and other assets of the Emanuel Group would be transferred to the Fosters finance companies, that an amount of $186,880,302.71 would be fixed as the amount due by the Emanuel Group to the Fosters finance companies and that debt would be supported by a judgment, thus giving the Fosters finance companies sufficient voting power to control meetings of creditors of the Emanuel Group and of Mr Guiseppe Emanuele. The plaintiffs also allege that, in consideration of the foregoing, the Fosters finance companies would pay $4.6 million to the nominee for Mr Guiseppe Emanuele; would permit several parcels of land held by members of the Emanuele family and subject to charges in favour of the Fosters finance companies to be transferred to the nominees of Mr Guiseppe Emanuele for $1.3 million which sum would be deducted from the sum of $4.6 million; that a sum of money would be made available for distribution among creditors of the Emanuel Group; and that certain fees would be paid to the solicitors for the Emanuel Group. The plaintiffs allege that the 1995 scheme was put into effect. They further allege that, among other things, a deed called "DOFR" gave effect to the understanding and other issues. The obtaining of the Queensland judgment in the sum of $186,880,302.71 is alleged to have been effected as part of the 1995 scheme. The plaintiffs say that the 1995 scheme was conceived and created for unlawful and improper purposes and that it was the result of collusion between companies in the Emanuel Group and their directors, the Fosters finance companies and the Fosters directors. The plaintiffs seek to set aside the 1995 scheme on grounds including duress, unconscionability, undue influence, breaches of fiduciary and statutory duties and on grounds available to them pursuant to s1317HD of the Corporations Law and s588FF of the Corporations Law.

[32]

To summarise, each of the plaintiffs' claims against the Fosters defendants requires the determination of questions which could have been grounds of defence to the action in the Supreme Court of Queensland. The fact that these grounds were not relied upon plainly forms part of the case for the plaintiffs to set aside the 1995 scheme. That fact only serves to emphasise the extent to which the determination of these issues bears upon the validity of the Queensland judgment. Expressed another way, many, if not most, of the issues in the current proceedings will be issues which would be canvassed in an action to set aside the Queensland judgment. The only court which properly has jurisdiction to set aside the Queensland judgment is the Supreme Court of Queensland as the court which initially pronounced the judgment. While the Queensland judgment stands this court must give effect to it. That judgment stands in the way and presents a number of difficulties in the determination of some of the issues in this action. Any orders made in this action for damages and restitution would confront headlong the orders made in the Supreme Court of Queensland. Indeed, the orders in the Queensland judgment intrude so much into the determination of the issues in this action and, in particular, into the issues concerning DOFR, that it will be difficult to prosecute the action unless and until the Queensland judgment is set aside. If this court were to hear and determine this action and a later application is made in the Supreme Court of Queensland to set aside the Queensland judgment, the possibility might arise of what Dawson J described in Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 at 512 as "contradictory judgments which ought not be permitted save in special circumstances": see also Hubner v Australia & New Zealand Banking Group Limited (unreported, Federal Court of Australia, Beaumont J, 21 November 1997). The fundamental difficulty for the plaintiffs is that there is a risk of conflicting judgments if two superior courts separately hear and determine actions in which there are issues common to both actions.

[37]

Secondly, the power of the insolvency court is exercised only in limited circumstances, namely, when the court is determining whether the judgment can be relied on by the petitioning creditor in support of the application for a sequestration order, or when a debtor relies upon the judgment as a set off when opposing an application for a sequestration order: Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571. It must be noted also that, in the case of the winding-up of a company, the liquidator is not estopped by a judgment from considering the admissibility of a proof of debt arising out a judgment binding the company: Re Quatrovision Pty Ltd (In Liq) [1982] 1 NSWLR 95; Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332, 340 to 341, except where the judgment debt is a debt upon which the winding-up order was made: Direct Acceptance Investments Pty Ltd v Blackwell (1995) 17 ACSR 89. Where the liquidator rejects a proof of debt, the ordinary remedy of the person claiming to be admitted as a creditor is to apply to the court to reverse or modify the decision: Tanning Research Laboratories Inc v O'Brien (supra) at 340. The proceeding is an appeal by the creditor pursuant to s1321 of the Corporations Law which enables a person aggrieved by a decision of a liquidator to appeal to the court. Though called an appeal, the proceeding is an originating proceeding which the court hears de novo: Tanning Research Laboratories Inc v O'Brien at 341. If the liquidator rejects the proof by the Fosters defendants of the judgment debts, they will be at liberty to appeal against his decision by commencing proceedings in either the Supreme Court of Queensland or in this court. It is reasonable to expect that they will commence those proceedings in the Supreme Court of Queensland which will have jurisdiction to hear the appeal notwithstanding that the liquidator is in South Australia: s42 of the Corporations (South Australia) Act 1990 and s58AA(2) of the Corporations Law. If the proceedings were commenced in this court, considerations of comity would require the proceedings to be transferred to the Supreme Court of Queensland. Thus, however the matter is regarded, one continually returns to the necessity for proceedings to set aside the Queensland judgment.

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