Morton v Young

3795/03 MICHAEL JOSEPH MORTON v DAVID GREGORY YOUNG JUDGMENT- Ex Tempore 1 HIS HONOUR: There are two applications before the Court today. They relate to the affairs of the two companies The Automated Office Pty Limited and The Automated Office (New South Wales) Pty Limited. They are both companies in which Mr Michael Morton and his wife were the shareholders. 2 One application has been made by Mr Morton which seeks to challenge the validity of the appointment of the defendant to these proceedings, Mr David Young, as liquidator of those companies. That application also, in the alternative, seeks an order extending the time to appeal from a rejection of proof of debt which Mr Young has made for the proof lodged by Mr Morton, and an order reversing the liquidator's decision to reject that proof of debt. The other application is an application by the liquidator which seeks to have the proceedings transferred to the Family Court. It is logical to deal with the liquidator's application first. 3 The application arises from some proceedings in the Family Court between Mr and Mrs Morton. On 22 October 2001 Faulks J made an order requiring the husband and wife to take such steps as were necessary to cause the companies to be wound up. That order was part of a set of orders which Faulks J made to determine an application for property settlement, which resulted, broadly, in 80% of available assets going to the wife. 4 On 20 December 2001 Faulks J made a further order, in which he directed that the orders he had made on 22 October 2001 not be stayed, "Except to the extent that the proceeds of the sale of various pieces of property referred to and the liquidation of the companies referred to will be retained in the trust account of the wife's solicitor pending the disposition of the husband's appeal to the Full Court of the Family Court of Australia or further order of this Court." 5 That partial stay was stated by his Honour to be conditional upon the husband's co-operation in the implementation of the order for the liquidation of the companies and the sale of the property referred to. There were some other conditions as well.

6 On 22 January 2002 Ms Offner, solicitor for the wife, wrote to Mr Young of William Buck & Co asserted that Mr Morton was agreeable to Mr Young taking all necessary steps to attend to the liquidation of the companies. Ms Offner asked William Buck & Co to contact Mr Morton directly concerning that.

7 On 10 May 2002 Chisholm J made an order, requiring the husband and wife to do all things necessary to appoint Mr Young to act as liquidator of the companies, and authorising a registrar to execute any documents necessary on behalf of the parties or either of them in case either defaulted.

8 Mr Morton had some correspondence with Mr Young about Mr Young's possible appointment as liquidator. As well, Mr Morton signed copies of a notice of meeting and a waiver of notice, preliminary steps to Mr Young being appointed as liquidator. The actual appointment of a liquidator did not proceed consensually, however.

9 On 31 July 2002 a Registrar of the Family Court signed various documents connected with the appointment of a liquidator to the companies, purporting to act pursuant to the order of Chisholm J of 10 May 2002. The documents which were signed were declaration of solvency documents, and a letter of authority to a potential liquidator, saying that Mr and Mrs Morton had, at a meeting of the board, resolved that he be requested to provide professional assistance, including the convening of the necessary meeting of company members, to enable the company to be placed in liquidation.

10 A general meeting of the members was called for 16 April 2002. There are some minutes of what purports to be a general meeting of members of the company held on 16 August 2002, which purport to resolve that the company be wound up as a members' voluntary liquidation. Those minutes are signed by Mrs Morton, and by no-one else.

11 The Full Court of the Family Court heard, on 27 May 2002, an appeal by Mr Morton. The first paragraph of the reasons for judgment of the Full Court, delivered on 29 August 2002, recite that it was an appeal by Mr Morton against orders made by Faulks J on 22 October 2001. The outcome of that appeal was to set aside the orders of 22 October 2001, and to remit the matter for rehearing before a single judge other than Faulks J. A relevant factor in the Court's decision was that Mr Morton had not appeared at the hearing before Faulks J.

12 The rehearing came on before Rowland J in the Family Court on 3 July 2003. On that occasion, Mr Morton was represented, for reasons which have not been gone into before me, by a next friend. Mr Morton's father, Mr Peter Morton, was appointed as the next friend.

13 The case settled on 3 July 2003. The Court made consent orders in terms of a document signed by Mr Morton's next friend, by Mr Morton's solicitor, by the wife and her solicitor. That document recited the assets of the husband and wife at the date of the order, and set out the facts relevant to their financial situation. One of those facts set out was, "The parties are entitled to the net proceeds of the sale of the property at Lot 8, Main Road, Laguna and the net funds held by the liquidator, Mr Young of William Buck, Chartered Accountants. The precise amount available has not yet been ascertained." 14 The notation also stated that, "Pursuant to these orders the Wife will receive 67.5% of the pool of assets available for distribution."

15 One of the orders which it was agreed would be made by consent, was, "That each of the parties shall do all acts and things to authorise the liquidator, David Gregory Young of William Buck, Chartered Accountants to pay any money due to either the husband or the wife to Abrams & Associates, the solicitors for the wife for payment out in accordance with these orders and the service of these orders shall be sufficient authority."

16 There is another document in existence dated 3 July 2003. It is a document which is addressed to William Buck Chartered Accountants, and purports to be signed by each of Mr Morton and Mrs Morton. It says, "We authorise you to pay to Abrams & Associates the balance of the monies due to either Michael Morton or Deborah Morton in any capacity including but not limited to shareholder, director or creditor held by you consequent upon the completion of the liquidation of the above companies in accordance with the Orders of the Family Court of Australia dated 3 July 2003.

17 Mr Morton appeared before me today acting for himself. He has informed me that he has given evidence on another occasion that he had not signed that particular document on that particular day. 18 To go back a little in the chronology, on 25 March 2003 Mr Morton sent to Mr Young a completed formal proof of debt form. It related to a claim of $171,208.04. On 11 April 2003 he sent a further letter to Mr Young which said that he had claims totalling $375,595. On 4 June 2003 Mr Young sent Mr Morton a notice of rejection of formal proof of debt or claim. Thus at the time of the settlement of the property claim on 3 July 2003 Mr Morton's proof of debt had been rejected, and no appeal against that rejection had been instituted.

19 The application for transfer to the Family Court is one made under section 1337H of the Corporations Act 2001. So far as relevant it provides-: "(1) This section applies to a proceeding (the "relevant proceeding") in a court (the "transferor court") if: (a) the relevant proceeding is: (i) a proceeding with respect to a civil matter arising under the Corporations legislation; or (ii) a subsection 1337B(3) proceeding; and (b) the transferor court is: (i) the Federal court; or (ii) a State or Territory Supreme Court. (2) Subject to subsections (3), (4) and (5), if it appears to the transferor court that, having regard to the interests of justice, it is more appropriate for: (a) the relevant proceeding; or (b) an application in the relevant proceeding; to be determined by another court that has jurisdiction in the matters for determination in the relevant proceeding or application, the transferor court may transfer the relevant proceeding or application to that other court." 20 Section 1337C covers jurisdiction on the Family Court with respect to civil matters arising under the Corporations legislation. The two applications which Mr Morton makes, for the order concerning his validity of the appointment of the liquidator, and for appealing against the rejection of his proof of debt, are both civil matters arising under the Corporations legislation. Hence the Family Court has jurisdiction to hear them. It is clear that this Court has jurisdiction under section 1337H (1) to transfer those proceedings to the Family Court.

21 As is often the case, however, finding that the Court has jurisdiction to transfer proceedings to the Family Court is only the beginning of the decision about whether that jurisdiction should be exercised. 22 The liquidator says that the issues which are raised will involve questions of the interpretation of various Family Court orders. He says that there is a question of whether the orders which Rowland J made on July 2003 proceeded on a basis which assumed the validity of the appointment of the liquidator, and whether, if that is so, it is not open to the parties to challenge that assumption which underlays the Court orders. The liquidator submits that even if that submission not be correct, the occasion would then arise for there being a possible application under the Family Court to amend orders it has made either under the slip rule, or under the power of the Court to set-aside compromises, where there has been a material mistake and an order has been entered pursuant to that compromise. 23 One possible candidate for the application of the slip rule is the orders made by the Full Family Court. Those orders set aside the order of Faulks J, but did nothing to set aside the order of Chisholm J of 10 May 2002, pursuant to which the parties were directed to appoint Mr Young as liquidator and the registrar was authorised to execute the documents. 24 It is suggested by the liquidator (by way of acknowledging a point which could possibly be made against him, rather than as a point he positively seeks to make) that it might be submitted that the Full Family Court by mistake failed to also set aside the order which Chisholm J made. I express no view on the likelihood of the Full Family Court having made a slip of that kind, beyond noting that the order which Chisholm J made does not appear to have been appealed against. The other order which it is submitted might be a candidate for the operation of the slip rule is the order of Rowland J of 3 July. 25 It is also submitted that, in deciding what orders would be appropriate, even if the appointment of the liquidator were to be set aside, or held to have been initially invalid, there are matters like procedural aspects of the conduct of the trial, including possibly the circumstances of appointment of the next friend, which might need to be taken into account in deciding the rights of the parties, and crafting any appropriate relief. It is also submitted that, even if the appointment of the liquidator was held to be vitiated, there may then be power to make a winding-up order under section 461 of the Corporations Act on the just and equitable ground and that, for what were essentially family companies like these ones, the evidence which has already been taken into account in the Family Court might be material for that purpose. 26 So far as the application for extension of time to appeal, and (if extension is granted) the appeal against rejection of proof of debt aspect is concerned, the liquidator accepts that there is no special advantage in the Family Court deciding those matters, but says that the issues involved in determination of those matters are not matters which involve any special expertise in corporate law, so there is no strong reason to keep them in this Court. There is, he submits, an advantage in keeping both aspects of the matter together, so if the challenge to the validity of appointment of the liquidator goes to the Family Court, the proof of debt matters should go too. 27 There has been no particular countervailing factor which has been pointed to by Mr Morton in his submissions. 28 In taking into account the interests of justice, under section 1337H (2), the Court can take into account interests of people other than the parties immediately before it. The wife will be affected by whatever the outcome of the current application is, and the Family Court has a wider range of powers than does this Court to take account of the wife's situation.

29 On balance it seems to me that the factors which the liquidator points to showed that it is more appropriate for this proceeding to be determined by the Family Court of Australia. Accordingly I transfer it to the Family Court of Australia. 30 The liquidator seeks that the costs of today's application be costs in the proceedings. That order is not opposed. I so order.

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