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[2009] FCA 664
Federal Court of Australia
2009-06-05
Greenwood J, Reeves J, Lindgren J
Original judgment source is linked above.
Introduction 1 By a notice of motion filed on 14 May 2009, the defendant, Australian Olives Limited (AOL), seeks an order that the proceeding "be permanently stayed and/or struck out", or, in the alternative, an order that the proceeding be stayed until the determination of both proceeding QUD 22/2009 in the Queensland District Registry of this Court (the Queensland Federal Court proceeding) and proceeding 2979/2008 in the District Court of New South Wales (the NSW District Court proceeding).
Facts 2 The plaintiff, Huntley Management Limited (Huntley) and AOL have been or are parties to several proceedings concerning six registered managed investment schemes. Those schemes are Australian Olives Projects Nos 1, 2, 3, 4, 5 and 6. The disputes relate to the alleged removal of AOL as responsible entity (RE) and its replacement by Huntley as RE, and the consequences of the alleged change in relation to the handing over of books and records, the transfer of assets and the apportionment of management fees. 3 The dispute in relation to Project 4 has already been the subject of decision: see Australian Olives Ltd v Livadaras (2008) 172 FCR 34. In that case, the meeting of members took place on 29 April 2008. The chairman of the meeting, Mr Livadaras, excluded certain votes which would have been favourable to AOL, the incumbent RE. Greenwood J rejected AOL's challenge to its removal and the appointment of Huntley based on the chairman's decision to exclude those votes and other grounds. 4 The present proceeding was commenced on 24 April 2009 and relates to Projects 1, 2 and 3. At the time of its commencement, the two other proceedings referred to at [1] above were already on foot. 5 In the Queensland Federal Court proceeding, C&C Fisher Pty Ltd (Fisher) as first plaintiff and AOL as second plaintiff seek relief against Mr Livadaras, Huntley and others in respect of Project 3. They seek a declaration that resolutions purportedly passed at a meeting of the members of Project 3 on 12 December 2008 removing AOL as RE and replacing it with Huntley as RE were not validly passed and were defeated. One of the declarations sought is that Fisher is not an associate of AOL within the meaning of the Corporations Act 2001 (Cth) (the Act). Apparently it is to be argued in that case that the removal and replacement resolutions were invalid because the chairman, again Mr Livadaras, wrongly rejected votes attempted to be cast by Fisher favourable to AOL. I was told, however, that the issue is not identical to that which was before Greenwood J in relation to Project 4. For one thing, it was explained that by the time of the meeting of the members of Project 3 on 12 December 2008, Mr Livadaras was possessed of more information than he had had when he chaired the meeting of the members of Project 4 on 29 April 2008. 6 The Queensland Federal Court proceeding is due to be heard by Reeves J in Brisbane from 10-12 June 2009. 7 In the NSW District Court proceeding, Huntley is the plaintiff and AOL the defendant. Huntley's claim in that proceeding relates to Project 6, while a cross-claim brought by AOL relates to Projects 4 and 5. It is not disputed that Huntley has replaced AOL as RE in respect of Projects 4, 5 and 6 (likewise, it is not disputed that it has done so in relation to Projects 1 and 2). Indeed, AOL has apparently delivered the books and records relating to Projects 1, 2, 4, 5 and 6 to Huntley. The dispute in the NSW District Court proceeding relates to an accounting for management fees for the financial year ended 30 June 2008. Huntley asserts that it is entitled to have AOL account to it for a proportion of the management fees received by AOL in respect of the full financial year ended 30 June 2008. Huntley claims to be entitled to the proportion represented by the period 19 March 2008 to 30 June 2008, which it asserts is $267,004.10. In its defence, AOL asserts that the relevant date is not 19 March 2008 but 28 March 2008. Moreover, it says that it was paid only $808,408.80 for the full year even though the total amount payable by members for the full year was $931,511.76. AOL states that the proportion of the $931,511.76 for the period 28 March 2008 to 30 June 2008 is only $239,240.73, not $267,004.10. 8 By its cross-claim in the NSW District Court proceeding, AOL claims that Huntley is liable to account to it for certain fees in respect of Projects 4 and 5 and is liable to it for interference with contractual relations. It further claims as a set off against any amount found to be owing by it to Huntley in respect of Project 6, the amount of Huntley's liability to it on the cross-claim. 9 The NSW District Court Proceeding is fixed for hearing commencing on 20 August 2009. 10 Against the above background, I turn to the forms of relief sought by Huntley in the present proceeding. 11 First, in paras 1.1 and 1.2 of its application (the proceeding should have been commenced by an originating process and the parties designated plaintiff and defendant) Huntley seeks a declaration that it is entitled pursuant to s 601FR of the Act to all books kept in relation to Project 3 and an order that AOL deliver to Huntley all books in its possession or control in relation to Project 3. AOL accepts that if the Queensland Federal Court proceeding is decided against it and in favour of Huntley, it must deliver up those books and has undertaken to do so. 12 Second, in paras 1.3 and 1.4 Huntley seeks a declaration that certain leases in respect of Projects 1, 2 and 3 are held by AOL on behalf of Huntley and an order that AOL transfer them to Huntley. 13 Third, in paras 1.5 and 1.6, Huntley seeks a declaration that all moneys held by AOL representing "scheme property" is held on behalf of Huntley and an order that AOL pay Huntley "all moneys representing scheme property". 14 Fourth, in paras 1.7 and 1.8, Huntley seeks a declaration that fees paid by members of Projects 1, 2 and 3 to AOL relating to the respective periods since it ceased to be the RE are held by AOL for the benefit of Huntley and an order that AOL pay those moneys to Huntley. 15 AOL has proffered an undertaking that if it is unsuccessful in the Queensland Federal Court proceeding and on any appeal against an unfavourable result at first instance, it will deliver to Huntley the books in respect of Project 3, as it says it has done in respect of Projects 1, 2, 4, 5 and 6, and execute transfers of the leases. Similarly, it undertakes that upon determination of the NSW District Court proceeding, subject to any appeal it will pay the management fees in respect of Projects 1, 2 and 3 in accordance with the decision of the District Court.
Legislation 16 Both parties rely on certain provisions within Div 2 (ss 601FJ-601FQ) of Pt 5C.2 of the Act. Section 601FJ, the first section in Div 2, provides as follows: (1) Despite anything in this Division, the company named in ASIC's record of registration as the responsible entity… of a registered scheme remains the scheme's responsible entity until the record is altered to name another company as the scheme's responsible entity… . (2) A purported change of the scheme's responsible entity is ineffective unless it is in accordance with this Division. Huntley is registered as the responsible entity of Project 3. It is not in dispute that according to ASIC records, AOL was registered as RE on 20 January 2000 and ceased to be RE on 17 December 2008, while Huntley was registered as RE on the latter date. Accordingly, in terms of s 601FJ(1), Huntley is named in ASIC's record of registration as the RE (see subs (1) above). AOL claims, however, in effect that the change from it to Huntley was "ineffective" because it was not made "in accordance with" Div 2 (see subs (2) above). 17 Section 601FM provides for the members of a scheme to remove a RE and to choose a new company to be RE. The calling of the meeting of members and voting is governed by Div 1 of Pt 2G.4 of the Act. In substance, AOL complains that the procedure that was followed in this case was not effective. 18 Section 601FR provides as follows: If the responsible entity of a registered scheme changes, the former responsible entity must: (a) as soon as practicable give the new responsible entity any books in the former responsible entity's possession or control that this Act requires to be kept in relation to the scheme; and (b) give other reasonable assistance to the new responsible entity to facilitate the change of responsible entity. Huntley contends that the expression "responsible entity" in s 601FR refers to the company that is registered as RE - in this case Huntley. 19 Section 601FS provides for a transfer of rights, obligations and liabilities of the former RE in relation to a scheme to the new RE.
Consideration 20 There is no dispute as to the principles which should govern the dealing with AOL's motion. Reference was made to Sterling Pharmaceuticals Pty Limited v The Boots Company (Australia) Pty Limited (1992) 34 FCR 287 and Software Engineers Australia (NSW) Pty Ltd v Bonket Pty Ltd (2002) 140 IR 112; [2002] FCA 1168. 21 AOL contends that in relation to Project 3, the question of the liability to deliver up the books will depend ultimately on the result in the Queensland Court proceeding. Both parties agree to act in relation to the books in accordance with that result - AOL to deliver them to Huntley and Huntley to return them to AOL if Huntley gains possession of them now. It may seem, therefore, that in substance the present proceeding is interlocutory, seeks discretionary relief, and should have been brought by interlocutory process in the Queensland Federal Court proceeding. 22 However, counsel for Huntley said that he rests his case, irrespective of the result in the Queensland Federal Court proceeding, on: · section 601FR of the Act; · Huntley's status as registered RE; and · the fact that Huntley is presently carrying on the responsibility of RE in so far as it can do so. He also points in written submissions to the civil penalty provisions of the Act (ss 601FC(5) and 1317E) and s 288-25 as well as other sections of the Taxation Administration Act 1953 (Cth), but those matters seem to go to discretion. 23 In substance, Huntley contends that it has an absolute right under the Act to the books unless and until the Queensland Federal Court proceeding is decided against it. A way should be found to try this question. 24 A separate question could be devised as to whether AOL is liable to deliver up the books based on the three circumstances mentioned in [22]. An alternative way of achieving the same object is that claims for relief 1.1 and 1.2 could be decided now on the basis that Huntley's evidence is limited to the three circumstances mentioned. The issue could be decided, perhaps on agreed facts, within a very short period indeed, and the hearing would probably take only a couple of hours. 25 The decision of that question would also determine the relief sought in paras 1.3 and 1.4 in so far as it relates to Project 3. I know of no reason why AOL has not transferred the leases for Projects 1 and 2 since it concedes that Huntley is the RE for those Projects. AOL's motion should therefore be dismissed in so far as it relates to paras 1.3 and 1.4 as those paragraphs relate to Projects 1 and 2. 26 The relief sought in paras 1.5 and 1.6 will not be granted and the proceeding should be stayed in respect of those paragraphs in the absence of a definition of "scheme property". 27 The proceeding should not be stayed in so far as it relates to paras 1.7 and 1.8 unless it is shown that those paragraphs would be resolved by the result of the NSW District Court proceeding concerning Projects 4, 5 and 6.
Conclusion 28 The proceeding will be stood over to Wednesday 10 June 2009 for the making of orders. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.
Counsel for the Plaintiff Mr B L Jones (Respondent to the Motion):
Solicitor for the Plaintiff Piper Alderman (Respondent to the Motion):
Counsel for the Defendant Mr J C Giles and Mr J S McLeod (Respondent on the Motion):
Solicitor for the Defendant McMahon Clarke Legal (Respondent on the Motion):
Huntley Management Limited
Australian Olives Limited