consideration
42 Rule 2.13 of the Federal Court (Corporations) Rules 2001 (Cth) provides as follows:
2.13 Leave to creditor, contributory or officer to be heard
(1) The Court may grant leave to any person who is, or who claims to be:
(a) a creditor, contributory or officer of a corporation; or
(b) an officer of a creditor, or contributory, of a corporation; or
(c) any other interested person;
to be heard in a proceeding without becoming a party to the proceeding.
(2) If the Court considers that the attendance of a person to whom leave has been granted under subrule (1) has resulted in additional costs for any party, or the corporation, which should be borne by the person to whom leave was granted, the Court may:
(a) direct that the person pay the costs; and
(b) order that the person not be heard further in the proceeding until the costs are paid or secured to the Court's satisfaction.
(3) The Court may order that a person who is, or who claims to be, a creditor, contributory or officer of a corporation be added as a defendant to the proceeding.
(4) The Court may grant leave to a person under subrule (1), or order that a person be added as a defendant to a proceeding under subrule (3):
(a) on application by the person or a party to the proceeding; or
(b) on the Court's own initiative.
(5) The Court may:
(a) appoint a creditor or contributory to represent all or any class of the creditors or contributories on any question, or in relation to any proceeding, before the Court, at the expense of the corporation; and
(b) remove any person so appointed.
43 There is no dispute between the parties that Bowesco is a contributory of the company. I proceed on the basis that the Court may, if the circumstances are appropriate, grant leave to Bowesco as a contributory of the corporation to be heard in the proceeding without becoming a party to the proceeding, pursuant to R 2.13(1)(a).
44 It is primarily pursuant to this rule that Bowesco seeks to be heard to raise its concerns on the proof of debt issue, although it also refers to the powers of the Court to allow a party to intervene or to be joined as a party, to which I will return.
45 Staying, however, with R 2.13, McKerracher J considered the application of this rule by reference to other authorities in Freehills, Re New Tel Ltd (in liq) ACN 009 068 955 [2008] FCA 762; (2008) 66 ACSR 311 (Freehills, Re New Tel). In that case an attempt was made by a third party (father of the proposed examinee under an examination summons) to be heard in relation to the ex parte application by the examiner relating to service of the examination summons out of the jurisdiction. That application to be heard was refused.
46 In Onefone Australia Pty Ltd v One.Tel Limited; Weston v Publishing and Broadcasting Limited [2007] NSWSC 1320, prospective defendants sought leave to be heard on a special purpose liquidators application to vary the function and powers he held and extend the time within which process could be served. Justice Barrett considered that there was a strong indication in the rules of the Court that a person named as a defendant in an unserved originating process is not intended to be heard on an application for extension of time within which service remains valid.
47 As to whether R 2.13(1) could be relied upon to obtain a right to be heard, Barrett J, at [22], noted that the capacity or status of a member or contributory may be rejected in the circumstances before him as insufficient. His Honour noted that the company was insolvent and its members had no tangible financial interest in the conduct of its winding up. The applicants did not, as members, stand apart from any other members of One.Tel, which was a listed public company presumably with thousands of shareholders.
48 In Pilarinos v Australian Securities and Investments Commission [2006] VSC 301, Gillard J refused an application by the State of Victoria under R 2.13 for leave to be heard in relation to an appeal from an order made in the Court dismissing an application made by three plaintiffs seeking reinstatement of a company that had been deregistered. His Honour, at [24]-[25], considered that the successful outcome of the application would not affect the rights or the interests of the State of Victoria and that the mere reinstatement of the company would not, of itself, prejudice or affect the rights of the State of Victoria.
49 In Freehills, Re New Tel, McKerracher J, having considered these authorities, concluded, at [48], that to grant the father of the proposed examinee the right to be heard on the matters before the Court would not finally affect the rights of the examinee as the matters were ex parte proceedings and the rights of the examinee would remain preserved until a later time.
50 In the present case, the situation is slightly different from those just discussed in that Bowesco, as the sole member of the company, is not a member of a publicly listed company and seeks to be heard on proof of a debt it wishes to dispute in circumstances in which the liquidator will not attend the hearing as a contradictor. If it were able to demonstrate that the debt sought to be proved does not exist or does not exist in the sum contended for then the financial health of the company would(?), on the face of it, be improved.
51 Before proceeding to consider the exercise of the power of the Court to grant leave to be heard under R 2.13, the powers of the Court under the other provisions that Bowesco relies upon may be noted. By R 9.05(1) of the Federal Court Rules 2011 (Cth), the Court may join a person as a party to a proceeding if that person ought to have been joined as a party or as a person by (b) is a person:
(i) whose cooperation might be required to enforce a judgment; or
(ii) whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or
(iii) who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.
52 On the face of it R 9.05(1) is not particularly apposite to the present circumstances although arguably R 9.05(1)(b)(ii) enables Bowesco to contend that its joinder is "necessary" to deal with the proof of debt issue.
53 Finally, R 9.12 enables the Court to grant leave to a person to "intervene in a proceeding" with such rights, privileges and liabilities (including liabilities for costs) as may be determined by the Court. Rule 9.12(2) says that the Court may have regard to:
(a) whether the intervener's contribution will be useful and different from the contribution of the parties to the proceeding; and
(b) whether the intervention might unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish; and
(c) any other matter that the Court considers relevant.
54 In this case, Bowesco says that its contribution would be useful and different from that of any other party to the proceeding as it would seek to contradict the plaintiff's position in relation to the debt proof of which is said to be in issue.
55 My view, if it is inappropriate for the Court to give leave to Bowesco to be heard in the proceeding under R 2.13 then it will be equally inappropriate to join Bowesco as a party or allow it to intervene in the proceeding.
56 The plaintiff in answer to the submission of Bowesco primarily contends that to allow Bowesco into the proceedings at this point on any basis would constitute an abuse of process. In this regard, the plaintiff does not suggest that to allow Bowesco to be heard in any capacity would constitute res judicata, or issue estoppel or that it would be impermissible as an Anshun estoppel.
57 The question of what was actually decided by the primary judge when the winding up order was made, as subsequently considered in the Full Court in the further appeal to the High Court, is what is primarily at issue between the parties on this interlocutory application.
58 On the one side, counsel for Bowesco urges that the primary judge only needed to determine whether the company was able to discharge the presumption of insolvency against it, and that the actual level of indebtedness was not in issue. With that characterisation of the determination of the primary judge on the winding up application, counsel for the plaintiff joins issue.
59 In my view, if it is clear from the nature of the proceeding and the determination made by the primary judge, then it would be an abuse of process for the Court to allow Bowesco, as a contributory of the company, to be heard in any capacity (whether as a contributory or by joinder or intervention) in this proceeding.
60 It is well recognised that the Court has the power to dismiss a proceeding as an abuse of process in circumstances which might also suggest that res judicata, issue estoppel or Anshun estoppel might be invoked as grounds for dismissal. In Dale v State of Western Australia [2011] FCAFC 46; (2011) 191 FCR 521 (Dale), at [112], the Full Court (Moore, North and Mansfield JJ) adopted what French J said in this regard in Spalla v St George Motor Finance Ltd (ACN 007 656 555) (No 6) [2004] FCA 1699 at [59]-[70]. The ultimate point of analysis endorsed by the Full Court is that the doctrines of res judicata, issue estoppel and Anshun estoppel do not exhaust the circumstances in which a proceeding may be regarded as amounting to an abuse of process by way of attempted relitigation of a determined dispute. The Full Court did not understand more recent decisions of the High Court concerning abuse of process to derogate from the force of this analysis. An application for special leave to appeal to the High Court against the decision of the Full Court in Dale was refused. On behalf of the three members of the Court who considered the special leave application (Hayne, Crennan and Kiefel JJ), Hayne J stated that, having regard to the facts and circumstances referred to by him, the applicants enjoyed insufficient prospects of success in an appeal against the finding that there was an abuse of process by reason of finding of fact in prior litigation: Dale v State of Western Australia [2011] HCA Trans 332 (9 December 2011). It is apparent from the transcript of this special leave application that the members of the High Court fully accepted that abuse of process is recognised as a separate and distinct basis upon which a proceeding may be dismissed in order to prevent relitigation of an issue.
61 I turn then to what was decided, and in what circumstances, in the primary proceeding before the primary judge. In this proceeding the Australian Securities and Investments Commission (ASIC) applied to wind up the company on the basis that the receivers had not retired and while they remained there was no prospect of paying any creditor other than the secured appointor. ASIC also submitted that the claim of the secured creditor, Westpoint Management, for its loan exceeded the aggregate value of the remaining assets of the company.
62 The primary judge, at [2], observed that the company was subject to a presumption of insolvency when receivers were appointed to it pursuant to a floating charge, under s 459C(2)(c) of the Corporations Act. At [4], the primary judge noted that the company opposed the application on the ground it was solvent and that it bore the onus of establishing its own solvency. In that regard, at [5], his Honour noted, amongst other things, that to discharge the onus the Court should ordinarily be presented with the "fullest and best" evidence of the financial circumstances of the respondent and that unaudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency.
63 His Honour, at [9], noted that the background to the proceeding was uncontroversial. The company, Lanepoint, redeveloped the Regency Motel site on Great Eastern Highway, Rivervale in Western Australia. This was financed, in part, by secured funds obtained from Suncorp Metway Limited (Suncorp) and Westpoint Management Pty Ltd as the responsible entity for the Westpoint Income Fund (WIF). Westpoint Management was a related and associated company within the Westpoint Group and WIF was a managed investment scheme which raised funds from the public for use in relation to Westpoint Group projects.
64 His Honour further noted, at [13], that the Suncorp receivers' appointment was continuing and that the receivers had paid the secured debt owed but awaited clearance from income tax obligations and a release from anticipated litigation before returning any surplus funds to Westpoint Management for the WIF as the next secured creditor.
65 The primary judge then dealt with the liability to WIF, an issue which he characterised as concerning the amount of the company's indebtedness to Westpoint Management. His Honour noted, at [21], that the resolution of this issue, irrespective of the company's indebtedness otherwise, would determine the application before him. He said it was common ground that the company had a facility with Westpoint Management, the responsible entity for the WIF by which Lanepoint received funding.
66 At [25], his Honour noted that the liquidator of WIF claimed that Lanepoint owed WIF approximately $6.6 million. At [26], his Honour noted that the company submitted there was credible evidence that the WIF liability could not possibly be $6.6 million or anything like it and pointed to the observation of Westpoint Management's receiver, Mr Read, at [15] of his affidavit of 25 February 2008, that "I have not made an agreement on the amount and I have not made an agreement as to how that amount may be settled". The company, therefore, submitted to the primary judge that the liability was somewhere between $0-$2.5 million. Accordingly, as the primary judge noted, at [27], the company submitted there was a genuine dispute as to the amount of the indebtedness to WIF.
67 I should note at the outset that the hearing in relation to the application before the primary judge on these issues appears to have occurred over some six or seven days between 25 March and 14 May 2009. At [28], the primary judge noted that a "great deal of evidence" was adduced in respect of the issues including detailed examination of, amongst others, Mr Carey, Ms Karen Carey and Mr Gregory Nairn on behalf of the Westpoint and Lanepoint interests. His Honour there expressly noted that:
No suggestion was made that there was other relevant evidence available going to the resolution of this question.
68 The primary judge dealt with the topic of "Reasoning on WIF liability" from [31]-[53]. At [53], his Honour made the following express finding:
I find that Lanepoint did draw down the WIF funds in the amount of $6.6 million and is obliged to repay those amounts. That amount will, of course, now be substantially more because of interest. This amount alone exceeds Lanepoint's total assets of $5,729,937. The transactions in the form of the $2m run around and Kingdream transfers which purported to reduce or extinguish the amount of Lanepoint's indebtedness to WIF were, I find, ineffective or liable to be set aside. These findings alone are sufficient to dispose of this application.
69 Then his Honour dealt with the topic of "Kingdream transfer and $2m run-around" from [54]-[77]. At [70], his Honour made the further express finding:
I find that the Kingdream transfer and the $2m run-around were improper transactions put into effect to conceal the true position that Lanepoint was indebted to WIF in approximately $6.6m and to render it unlikely that WIF could recover those funds. I accept the submission of ASIC that they were ineffective transactions.
70 Then his Honour dealt with the question whether the Kingdream transfer constituted an uncommercial transaction and unreasonable director-related transaction. Ultimately, at [86], the primary judge made the express finding:
I find for the above reasons that Lanepoint is indebted to Westpoint Management as the responsible entity for WIF in the amount of not less than $6.6m.
71 The submission made on behalf of the plaintiff is that this ultimate finding, having regard to what preceded it, was not simply a finding that there had been a failure to rebut the presumption of insolvency. With that submission, I agree.
72 In those circumstances, in answer to the primary submission put on behalf of Bowesco, the determination made by Gilmour J was not simply about whether the presumption of insolvency of the company had been rebutted. In order to deal with that legal issue, the question of the company's indebtedness to Westpoint Management as the responsible entity for WIF in a very particular amount, having regard to particular transactions, was directly in issue. Evidence was led over a number of days concerning the particular transactions. The primary judge made findings about those transactions adverse to the interests of the company and to the advantage of Westpoint Management.
73 In all of those circumstances there is little or no room in the current proceeding for a party, such as Bowesco, as a contributory of the company, to enter the fray again to re-argue the transaction points that were canvassed in detail before the primary judge. It is not to the point either to say that fresh representations, analysis or "evidence" might be led about how those transactions should be viewed. Evidence was led about them and argument was addressed to the primary judge as to exactly how those transactions should be viewed, in respect of which his Honour made the express findings noted above.
74 In my view, and notwithstanding that Bowesco is a contributory of the company, it would be inappropriate to grant Bowesco leave to be heard in this proof of debt proceeding, or to consider joining it as a party or allowing it to intervene in the proceeding. To do so would enable the relitigation of issues plainly determined in the course of the proceeding before the primary judge as a result of which he finally ordered that the company be wound up in insolvency. To allow for those issues to be reagitated - in fact, relitigated - would constitute an abuse of process.
75 For these reasons, I would refuse the interlocutory application of Bowesco to be heard or joined as a party or treated as an intervenor or otherwise be permitted to be involved in some Court ordered mediation of the current application of the plaintiff. The reality is that the company is insolvent. The fact that Bowesco is a contributory is a relevant issue but, in the end, an incidental issue. The company is being wound up. The liquidator, albeit not in funds, has chosen not to be heard in relation to the proof of debt proceeding. However, the existence and quantum of the debt has already been the subject of extensive consideration and findings by the primary judge in the winding up proceeding. To allow Bowesco to enter the proceeding in any capacity at this point would simply be to permit Bowesco to relitigate the debt issue. This would in the circumstances constitute an abuse of process.