Rathner, in the matter of Mildura Grand Pty Ltd (in liq) v Bendigo Skyrider Pty Ltd

Federal Court of Australia|2011-06-03|Before: Gordon J

INTRODUCTION 1 On 17 December 2010, Messrs Rathner and Coyne were appointed as joint and several administrators and then joint and several liquidators (the Liquidators) of each of Mildura Grand Pty Ltd (Administrators Appointed) (in liquidation) (Mildura), Telegraph Gisborne Pty Ltd (Administrators Appointed) (in liquidation) (Telegraph) and Cross Keys Pty Ltd (Administrators Appointed) (in liquidation) (Cross Keys) (collectively, the Corporate Plaintiffs). 2 The Liquidators allege that on 21 December 2010: 1. $82,600 was withdrawn from Mildura's bank account; 2. $71,900 was withdrawn from Cross Keys' bank account; and 3. $7,200 was withdrawn from Telegraph's bank account, and paid to an unsecured creditor of each company, namely Bendigo Skyrider Pty Ltd, the defendant. 3 The Liquidators further allege that each of the payments was made at time when each of the Corporate Plaintiffs was insolvent and the payment was: 1. an unfair preference pursuant to s 588FA of the Corporations Act 2001 (Cth) (the Act); 2. an insolvent transaction pursuant to s 588FC(a) of the Act; 3. voidable pursuant to s 588FE(2A) of the Act; and 4. void pursuant to s 437D of the Act. 4 The plaintiffs sought declarations that the payments were voidable and / or void and that the defendant pay the relevant plaintiff the amount of the payment together with interest and costs. 5 The proceedings were filed on 4 March 2011 against the defendant and three directors of the defendant. On 18 March 2011, the defendants filed a notice of appearance. On 1 April two events occurred. First, the defendant's solicitors were given leave to cease to act on behalf of all of the defendants. Secondly, the plaintiffs were given leave to discontinue against the second, third and fourth defendants and the matter proceeded solely against the defendant. The defendant was ordered to file and serve a defence to the amended originating process and statement of claim by 19 April 2011. No defence was filed. On 13 May 2011, upon an undertaking by the plaintiffs' solicitors to file the amended originating process and the statement of claim and an affidavit of service of those documents on the defendant, the plaintiffs were given leave to make application for judgment in default if the defendant did not file and serve a defence by 4:00 pm on 30 May 2011. The plaintiffs have complied with the undertaking. The defendant did not file and serve a defence to the claim by 30 May 2011 or at all. 6 Pursuant to the orders made by the Court on 13 May 2011, the plaintiffs now seek judgment in default.

APPLICABLE PRINCIPLES - O 35A R 3(2)(c) OF THE FEDERAL COURT RULES 7 The plaintiffs seek judgment against the defendant under O 35A r 3(2)(c) of the Federal Court Rules. The relevant parts of O 35A r 2(2)(d) provide: For this Order, a respondent is in default if the respondent has not satisfied the applicant's claim and: … (d) the respondent fails to comply with an order of the Court in the proceeding; … 8 Order 35A r 3(2)(c) provides: If a respondent is in default, the Court may: … (c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings - give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the statement of claim; and (ii) the Court is satisfied it has power to grant. … 9 An order for judgment in default under O 35A r 3(2)(c): 1. does not require proof of the claim by evidence, but only requires that - on the face of the statement of claim - there is a claim for the relief sought; and 2. the claim must fall within the jurisdiction of the Court: see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3]. See also Quatre-Bornes Pty Ltd v John H Walker & Associates [2010] FCA 492; Turner, In the matter of L.A. Technologies Pty Ltd (ACN 092 001 495) (In Liquidation) [2009] FCA 805; Chanel Limited v Donoghue [2008] FCA 1643; Nokia Corporation v Yu (No 2) [2008] FCA 1088 and Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856. 10 Two questions arise. Is the defendant in default, and if so, should the Court exercise its discretion and enter judgment for the plaintiffs against the defendant? 11 The defendant is in default of the Orders made by the Court on 13 May 2011: see [5] above. In those circumstances, I consider that the Court should move to determine whether to exercise its discretion under O 35A of the Federal Court Rules.

PLAINTIFFS ENTITLED TO JUDGMENT AGAINST THE DEFENDANT 12 As noted above, in relation to each of the payments, the amended statement of claim pleads: 1. the payment - date and amount; 2. the identity of the payer and the payee; 3. the payee was an unsecured creditor of the payer; 4. that unsecured creditors are unlikely to receive a dividend in the liquidation of the relevant Corporate Plaintiff and, as a result of the payment, the defendant received from that Corporate Plaintiff more than the defendant would have received from the Corporate Plaintiff in respect of that debt if the payment was set aside and the defendant was to prove in the winding up of the Corporate Plaintiff; 5. when the payment was made the payer was insolvent. 13 In addition, the plaintiffs plead that they rely upon s 588E of the Act, namely that in a recovery proceeding (which includes proceedings under s 588FF by the Liquidators as is this case (ss (1)(a))): … (3) If: (a) the company is being wound up; and (b) it is proved, or because of subsection (4) or (8) it must be presumed, that the company was insolvent at a particular time during the 12 months ending on the relation-back day; it must be presumed that the company was insolvent throughout the period beginning at that time and ending on that day. … (8) If, for the purposes of another recovery proceeding in relation to the company, there has been proved: (a) if the other proceeding is of the kind referred to in paragraph (1)(a) of this section--a matter of the kind referred to in a paragraph of section 588FC or of subsection 588FG(2); or … it must be presumed that that matter was the case, or that the matters constituting that defence were the case. (9) A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the proceeding concerned. The matters referred to in s 588FC include, inter alia, that the company was insolvent at the time the transaction was entered to. 14 Consistent with the authorities referred to above, it is apparent that on the face of the statement of claim there is a claim for the relief sought and the claim falls within the jurisdiction of the Court.

RELIEF 15 The plaintiffs seek declarations and a liquidated sum. The orders for payment of a liquidated sum are appropriate to be made, together with interest on those sums: O 35A r 3(2)(b)(ii). 16 In relation to the declarations sought, the Court has a wide discretionary power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth). How does O 35A sit with this discretionary power? Order 35A imposes no restraints upon the relief sought. It is now established that refusals by the Courts in the past to make declarations in cases of default and deemed admissions were based on a practice, not a rule of law: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at [52] - [59] and Bank of Kuwait and the Middle East v Ship MV "Mawashi Al Gasseem" (No 2) (2007) 240 ALR 120 at [15]. 17 Consistent with that line of authority, it is necessary to identify considerations relevant to the exercise of the discretion to grant or not grant declarations in a case such as the present. Considerations include: 1. whether the declaration will have any utility; 2. whether the proceeding involves a matter of public interest; and 3. whether the circumstances call for the making of the Court's disapproval of the contravening conduct, Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99-100; Australian Competition and Consumer Commission v Powerballwin.com.au Pty Ltd [2010] FCA 378 at [41] and Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 at 437-438. 18 In the present case, I do not consider that the declarations will have utility. The appropriate relief is the recovery of the payments made to the defendant. The orders provide for those payments to be made. There is also no public interest to be served in making the declarations and although the circumstances call for the Court to disapprove of the conduct, it is not conduct which necessitates the making of the declarations sought by the plaintiffs. 19 Finally, I will order the defendant to pay the plaintiffs' costs of the proceedings, such costs to be taxed in default of agreement. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

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