Nationwide Produce Holdings Pty Ltd v Davies & Anor

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3370/03 NATIONWIDE PRODUCE HOLDINGS PTY LTD (in liq) AND ITS LIQUIDATOR DAVID GREGORY YOUNG v RONALD GEORGE DAVIES IN HIS CAPACITY AS LIQUIDATOR OF LINKNARF LTD (in liq) (FORMERLY FRANKLINS LTD) & ANOR JUDGMENT 1 By their originating process filed on 20 June 2003, the plaintiffs, Nationwide Produce Holdings Pty Ltd (in liq) ("Nationwide") and its liquidator, David Gregory Young ("Young"), sought the removal of the first defendant, Ronald George Davies ("Davies") as liquidator of Linknarf Ltd (in liq) ("Linknarf") pursuant to the Corporations Act 2001 (Cth), s 503 and an inquiry as to his conduct as liquidator under s 536(1). Additionally, an injunction was sought restraining Davies from making any further payments in the winding up of Linknarf without the prior written consent of the plaintiffs pending the outcome of proceedings in the Federal Court. The defendants sought an order under s 1337H(2) for the transfer of the proceedings to the Federal Court. 2 On 23 May 2001, Nationwide commenced proceedings in the Federal Court against Linknarf claiming damages for misleading and deceptive conduct and for breach of contract in the supply of fruit and vegetables and related products. A realistic assessment of quantum was alleged to be $1,336,000. 3 On 3 December 2001, Nationwide commenced proceedings in this Court. Its application for the appointment of a provisional liquidator was dismissed by Barrett J on 4 December 2001. 4 On 15 April 2002, Linknarf was placed in a members' voluntary winding up. 5 On 22 April 2002, Nationwide lodged a proof of debt for $1,336,000 which Davies disallowed. Nationwide commenced further proceedings in the Federal Court against Linknarf and Davies appealing against the disallowance under the Corporations Act 2001 (Cth), s 1321. Both Federal Court proceedings are to be heard concurrently by Whitlam J. 6 Davies had caused interim dividends to be paid to creditors. The plaintiffs are concerned as to whether Linknarf continues to be solvent and whether it will have assets sufficient to meet the claim for damages if successful. On 21 March 2003, Nationwide sought an undertaking from Davies that he would not make any further dissipation of moneys held by him as liquidator without Nationwide's written consent. Davies declined to give that undertaking and the current proceedings in this Court were commenced. 7 The Corporations Act 2001 (Cth), s 1337H(2)(a) provides that if it appears to the Court, having regard to the interests of justice, that it is more appropriate for the relevant proceedings to be determined by another Court that has jurisdiction in the matters for determination, the Court may transfer the relevant proceedings to that other Court. 8 In Winpar Holdings Ltd v National Consolidated Ltd [2001] FCA 1663, Allsop J transferred proceedings to the Victorian Supreme Court to avoid a significant repetition of evidence and the risk of inconsistent findings. In Rabsnead Pty Ltd v Schmierer [2002] FCA 304, Conti J transferred proceedings to the Supreme Court of Queensland because of the geographical location of the insolvent administration of the company, the places of business of the majority of creditors and former directors and administrators, the place of residence of potential witnesses and the location of the unfinished development the subject of the dispute. In Gloria Marshall Australia Pty Ltd (in liq) v Bell Press Pty Ltd [2002] NSWSC 1191, Young CJ in Eq said that the best way of dealing with such matters was by common sense. 9 The defendants argued that the bringing of proceedings in this Court wastes costs and time. Whitlam J has had control of the Federal Court proceedings since 23 May 2001. He is familiar with the issues. 10 Secondly, the defendants argued that Nationwide's proper remedy was to apply to the Federal Court for an interlocutory order restraining the liquidator from further dissipating funds. If granted, it was argued that Nationwide's position would be wholly protected pending the outcome of the Federal Court proceedings. 11 Thirdly, it was argued that there was a significant risk of repetition of evidence and inconsistent findings. It was submitted that to be entitled to the claimed relief, Nationwide had to establish that it was a creditor and that it could not do so unless the Federal Court proceedings were resolved in its favour. 12 Linknarf was formerly called Franklins Ltd. In Nationwide Produce Holdings Pty Ltd (in liq) v Franklins Ltd (2002) 20 ACLC 309, the unsuccessful proceedings for the appointment of a provisional liquidator, Barrett J, following Santow J in Re Wilson Market Research Pty Ltd (1996) 39 NSWLR 311, concluded that Nationwide's claim for unliquidated damages in the Federal Court could not be regarded as constituting it a creditor, even prospectively or contingently. 13 The plaintiffs submitted that neither the Corporations Act 2001 (Cth), s 503 nor s 536(1) required the moving party to be a creditor. In sharp contrast with other provisions defining the status of applicants, those sections are silent. No doubt the Court would require some connection between the applicant and the liquidator but it was submitted that it was unnecessary for the applicant to be a creditor of the company in liquidation. On that basis, Nationwide was distinguishable. In contrast with s 503 and s 536(1), the status of applicants for a winding up order is prescribed under s 459P(1). 14 In Alati v Wei Sheung (2000) 34 ACSR 489 at 493, Young J dealt with an argument that Wilson Market Research was authority for the proposition that a person who had an unliquidated claim was not a contingent creditor until the claim was properly quantified. His Honour pointed out that if Wilson Market Research had so decided, it was inconsistent with the Full Court of the Supreme Court of Queensland in Re Community Developments Pty Ltd [1969] Qd R 1 at 6 and contrary to the affirmation of that decision by the High Court in Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455. His Honour went on to say that the rationale for Wilson Market Research was given by Santow J himself in Mandarin International Developments Pty Ltd v Growthcorp (Aust) Pty Ltd (1998) 143 FLR 408 at 422 that if a debt is genuinely disputed and the dispute is yet to be resolved, the person with the disputed debt is not a creditor and cannot be a contingent creditor. It was submitted that Barrett J in Nationwide was led into error by the failure of counsel to refer his Honour to these decisions. 15 It was submitted that on the basis that Nationwide was distinguishable or that it was wrongly decided, it was unnecessary in proceedings in this Court to duplicate evidence in the proceedings in the Federal Court. 16 Because of the view I take of other arguments, it is unnecessary for me to rule on these submissions. However, while I am of the view that Nationwide is distinguishable in that an applicant for relief under the Corporations Act 2001 (Cth), s 503 or s 536(1) need not be a creditor, it does not seem to me that Nationwide's claim against Linknarf is now, or was when considered by Barrett J, other than a genuinely disputed one, incapable yet of giving rise to an existing obligation sufficient to constitute Nationwide a contingent creditor. 17 The defendants argued, fourthly, that the issues and outcome of the current proceedings and the proceedings in the Federal Court overlapped and were interrelated. 18 As a matter of common sense there is an interrelationship between the proceedings in this Court and those in the Federal Court. The injunctive relief claimed in this Court is sought pending the outcome of the proceedings in the Federal Court. There is a potential interrelationship between the conduct of Davies in refusing to give the undertaking and his conduct in disallowing the proof of debt. 19 It seems to me appropriate, that if an inquiry is to be conducted, it ought to be conducted in the Court seised with the dispute as to the proof of debt. The plaintiffs' position would be safeguarded pending the resolution of the proceedings in the Federal Court by making an application for an interim injunction in that Court. The same principles apply to such an application whether made in this Court or in the Federal Court. In my view, the interests of justice are better served if these proceedings are transferred to the Federal Court. 20 In Winpar, Allsop J made the telling point that there is no utility in transferring a matter to another Court unless the judge dealing with the proceedings in that other Court thinks it appropriate to deal also with the matter to be transferred. I adopt the course taken by Allsop J and will make no order on the interlocutory process at this stage but will stand the matter over to allow the parties to approach Whitlam J to ascertain his Honour's views on my proposal to transfer the proceedings in this Court to the Federal Court for hearing by him in conjunction with the proceedings between Nationwide and Linknarf currently before him.

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