Yeo, in the matter of Armstrong and Shaw Pty Ltd (in liq) v Whiteman [2020] FCA 849 | Case summary

Yeo, in the matter of Armstrong and Shaw Pty Ltd (in liq) v Whiteman [2020] FCA 849 | Case summary | Zoe

[15]

History of this proceeding 2 In 2017, this Court made orders winding up: (a) ACN 147 341 991 Pty Ltd (formerly trading as DNV Accountants & Business Advisors) (ACN 147 341 991); (b) Ainslie Harding & Wood Solicitors Pty Ltd (ACN 607 552 741); (c) Armstrong and Shaw Pty Ltd (ACN 148 949 375); (d) Bolton & Swan Pty Ltd (ACN 153 647 360); and (e) A & S Services Australia Pty Ltd (ACN 165 857 321), (collectively, the Liquidated Companies), and appointed Andrew Reginald Yeo and Gess Michael Rambaldi (Liquidators) as liquidators of those companies. 3 For previous litigation in this Court involving the Liquidated Companies and the parties to this proceeding, see the following decisions of Davies J: Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd [2017] FCA 437; Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd (No 2) [2017] FCA 663; Deputy Commissioner of Taxation v Batchelor [2017] FCA 950 and Deputy Commissioner of Taxation v Whiteman [2017] FCA 951. 4 The Liquidators, by their originating process dated 20 March 2020 in this proceeding, seek directions and associated relief concerning the entitlement of the Liquidated Companies to the proceeds of sale of three real properties that the Liquidators allege were purchased with, or had mortgages serviced by, money that was provided by the Liquidated Companies notwithstanding that the properties were registered in the names of third parties. The Liquidators allege that these arrangements were put in place to disguise the true ownership of the real property assets from the Australian Taxation Office. 5 On 7 May 2020, the proceeding was listed before me for a case management hearing. At that hearing Mr Moller of counsel appeared with Ms Bell of counsel for the plaintiffs. The first defendant, Mr Whiteman, appeared in person. Mr Hamilton, a solicitor, appeared on behalf of the second defendant, Ms Holder. Mr Wright, a solicitor, appeared on behalf of the third defendant, Ms Ymer. Mr Davis, a solicitor, appeared on behalf of the sixth defendant, L H Aust Pty Ltd. There was no appearance for the fourth and fifth defendants. 6 The second and third defendants informed me at the case management hearing that they wished to make an application to stay this proceeding pending the hearing and determination of the Family Court proceeding. 7 After hearing the parties, I made timetabling orders at the case management hearing for the defendants to file and serve any application to stay this proceeding, the filing of affidavits and submissions in support or opposition to any stay, and for the matter to be listed before me today. 8 By interlocutory application dated 22 May 2020, the third defendant applied for the following orders: 1. An order that this proceeding be stayed pending determination of Family Court of Australia proceeding BRC12096/2017, or as otherwise ordered by the Court. 2. Alternatively, an order that this proceeding be stayed pending determination of any application by the Plaintiffs to the Family Court of Australia to intervene as a party pursuant to Rule 6.05 of the Family Law Rules 2004 or otherwise intervene pursuant to Rule 6.06 of those Rules in proceeding BRC12096/2017. 3. The Plaintiffs pay the Third Defendant's costs of the application. 9 Although the terms of the interlocutory application do not state so, the third respondent, in her written and oral submissions, alternatively sought for this proceeding to be transferred to the Family Court pursuant to s 1337H(2) of the Corporations Act. 10 The third defendant's interlocutory application is supported by an affidavit of Jacob William Cooke, solicitor for the third defendant, sworn 22 May 2020 (Cooke affidavit). The third defendant's stay application is supported by the first and second defendants. 11 By a notice dated 22 May 2020, the second defendant gave this Court notice of a claim which she has made in the Family Court proceeding in which she seeks declarations from the Family Court that she has an interest in the real properties which are the subject matter of the Liquidators' claims in this proceeding. 12 The second defendant filed written submissions dated 11 June 2020. The third defendant filed written submissions dated 12 June 2020. The plaintiffs filed written submissions in reply on 16 June 2020. 13 I heard the parties today via video-link. Mr Moller of counsel appeared for the plaintiffs. Mr Hamilton, a solicitor, appeared on behalf of the second defendant. Mr Henderson of counsel appeared on behalf of the third defendant. Ms Corbett, a solicitor, appeared on behalf of the sixth defendant. There was no appearance for the first, fourth and fifth defendants. The first respondent had previously indicated to my chambers that he supported the third respondent's interlocutory application. My chambers had also previously been informed that the fourth defendant had indicated that it did not intend to appear unless specifically required by the Court.

[16]

Background and submissions 14 In these proceedings, the Liquidated Companies claim an interest in three properties, or the proceeds of sale of them, being the properties located in the suburbs of Balaclava, Elwood and Port Melbourne respectively in the State of Victoria (collectively, Properties). In a previous decision, Davies J, in the course of appointing the Liquidators as provisional liquidators of four of the Liquidated Companies, remarked that the evidence in those proceedings (albeit on an ex parte basis) strongly indicated that the first respondent to this proceeding beneficially owned the Properties: Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd [2017] FCA 437 at [25]-[26]. 15 As set out in the affidavit of Andrew Reginald Yeo dated 20 March 2020 filed in this proceeding (Yeo affidavit), the Liquidators claim to have identified funds paid from the Liquidated Companies towards the purchase of the Properties and to maintain the mortgage-secured loans obtained to buy them. On that basis, the Liquidated Companies claim to be entitled to some or all of the proceeds of sale of the Properties. 16 As set out in the Cooke affidavit, the third defendant claims in the Family Court proceeding that: (a) she was in a de facto relationship with the first defendant to this proceeding, Mr Whiteman, from 1995 to 2017; (b) she is seeking orders in the Family Court proceeding for property settlement arising from that de facto relationship (noting also that the second defendant, Ms Holder, is making a similar claim arising from a separate alleged de facto relationship with Mr Whiteman); and (c) the proceeds of sale of the Properties constitute some or all of the matrimonial property pool in that they are property of the parties to the de facto relationship or either of them within the meaning of s 90SM of the Family Law Act 1975 (Cth) (Family Law Act), and are thus liable to have any legal or equitable interests in them altered in her favour. 17 Central to the third defendant's claims in the Family Court proceeding are her allegations that she made significant financial and non-financial contributions to the acquisition and payments in respect of the Properties and that the plaintiffs' legal ownership of the properties was intended by Mr Whiteman to disguise his contributions to, and beneficial interests in, the Properties. The Cooke affidavit further outlines the extent to which it is claimed that Mr Whiteman exercised ultimate control over the Liquidated Companies and the Properties. 18 The second defendant likewise claims that she has an interest in the proceeds of sale and the Properties. Whilst the second defendant has not filed an affidavit verifying her claims, the basis of her claims is stated in her notice dated 22 May 2020 and may be summarised as follows: (a) the second defendant claims that she was a de facto partner of the first defendant for the period of June 2005 to February 2016. The second defendant has filed an Initiating Application in the Family Court seeking declarations that she has an interest in the Properties, and is seeking that there be a division of assets to recognise her financial and non-financial contributions to these assets, as well as her future needs, pursuant to ss 90SE, 90SF, 90SL and 90SM of the Family Law Act; (b) in relation to the Port Melbourne property, the second defendant claims that she not only made non-financial and financial contributions to the upkeep of this property, but funded the purchase of the property by way of funds applied to that purchase from the sale of a previous property in Wyndham Vale, into which she had deposited up to $85,000 along with the first defendant. The second defendant claims to be a guarantor to the mortgage on that property; (c) in relation to the Balaclava property, the second defendant claims that she has an equitable claim on the funds from the sale of this property, as it was purchased in 2011 during the period of her de facto relationship with the first defendant. The second defendant claims that, although the contract of sale for this property was in her name, the purchase of the property was subsequently completed unbeknown to her in the name of the fourth defendant, Mr Batchelor. The second defendant claims the funds to purchase this property came from the development and property investment by the first defendant which occurred during the course of the second defendant's de facto relationship with the first defendant; and (d) in relation to the Elwood property, the second defendant claims that, although this property is registered in the name of SZKH Pty Ltd, the funds used to purchase this property were received by the first and second defendants from the sale of a childcare property in Preston, Victoria. 19 The Family Court proceedings, which were commenced in 2017, were listed for trial in May 2020. However, the trial was adjourned as a result of the COVID-19 pandemic and the late filing of materials by various parties. The parties to the Family Court proceeding include the Deputy Commissioner of Taxation, who is not a party to this proceeding. In 2017, the Deputy Commissioner obtained summary judgment against the first respondent in respect of unpaid tax related liabilities totalling $8,453,699.99: Deputy Commissioner of Taxation v Whiteman [2017] FCA 951 at [4]-[8] per Davies J. 20 The third defendant (with the support of the first and second defendants) contends that the interests of justice are best served by a stay of this proceeding or, alternatively, the transfer of this proceeding to the Family Court pursuant to s 1337H(2) of the Corporations Act. 21 In response, the plaintiffs submit that the applications to stay, or alternatively transfer, the proceeding should be refused on the basis that the more efficient course is for this Court to determine the extent of the Liquidated Companies' interests in the proceeds from the sale of the Properties, and leave the parties to the Family Court proceeding to argue about the balance of any proceeds. The plaintiffs contend that, to the extent that the Liquidated Companies have an entitlement to the proceeds, those proceeds will not comprise part of the property the subject of the Family Court proceeding. On this basis, the plaintiffs contend that the suggestion that there is an overlap between this proceeding and the Family Court proceeding is misconceived. The plaintiffs acknowledge that a determination in this proceeding may raise an Anshun or an issue estoppel against the parties to this proceeding. However, the plaintiffs contend that any such estoppel would be advantageous to the conduct of the Family Court proceeding, since the scope of the assets in dispute will have been clarified, leaving the parties to the Family Court proceeding free to prosecute such claims as they see fit.

[18]

Transfer to the Family Court 23 There are various means by which this Court may transfer a proceeding to the Family Court. For instance, s 5(5) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) confers a wide power to effect such a transfer: see, for example, Austec Wagga Wagga Pty Ltd (in liq) v Cullen [2015] FCA 400 per Gleeson J. Rule 27.01 of the Federal Court Rules 2011 (Cth) also recognises that a party may apply for the transfer of proceedings under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (see s 18A), the Australian Consumer Law (see s 138E of the Competition and Consumer Act 2010 (Cth)), the Bankruptcy Act 1966 (Cth) (see s 35A) or the Income Tax Assessment Act 1936 (Cth) (see s 14ZZS of the Taxation Administration Act 1953 (Cth)). However, for the present proceeding, the transfer power invoked by the third defendant is conferred by s 1337H(2) of the Corporations Act. 24 Section 1337H of the Corporations Act relevantly provides as follows: Transfer of proceedings by the Federal Court and State and Territory Supreme Courts (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. [Subsections (3)-(5) relate to "subsection 1337B(3) proceedings", which are irrelevant for current purposes.] … (6) Nothing in this section confers on a court jurisdiction that the court would not otherwise have. (7) The fact that some references in this section to the interests of justice include the desirability of related proceedings being heard in the same jurisdiction does not of itself mean that other references to the interests of justice, in this section or elsewhere in this Act, do not include that matter. 25 Section 1337L of the Corporations Act provides that, in deciding whether to transfer a proceeding under section 1337H (or 1337J or 1337K), a court must have regard to: (a) the principal place of business of any body corporate concerned in the proceeding or application; and (b) the place or places where the events that are the subject of the proceeding or application took place; and (c) the other courts that have jurisdiction to deal with the proceeding or application. 26 A transfer under s 1337H(2) may be made on the application of a party at any stage, or of the court's own motion: s 1337M of the Corporations Act. There is no appeal from a decision under s 1337H(2) to transfer, or not to transfer, a proceeding: s 1337R of the Corporations Act; Wileypark Pty Ltd v AMP Ltd [2018] FCAFC 143; 265 FCR 1 at [20] per Allsop CJ. 27 The present proceeding, which involves an application under, primarily, ss 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations) (IPS) (being Sch 2 to the Corporations Act), relates to a "civil matter arising under the Corporations legislation" for the purposes of s 1337H(1)(a)(i). (Section 9 of the Corporations Act defines a "civil matter" as "a matter other than a criminal matter". Also, although the s 9 definition of "Corporations legislation" does not refer to the IPS by name, the IPS forms part of the Corporations Act: see s 600K of the Corporations Act.) 28 The power under s 1337H(2) may only be exercised to transfer a proceeding to "another court that has jurisdiction in the matters for determination in the relevant proceeding or application". The Family Court is conferred jurisdiction to hear the present proceeding under s 1337C(1) of the Corporations Act, which provides that "[j]jurisdiction is conferred on the Family Court with respect to civil matters arising under the Corporations legislation". See In the matter of PJL Group Pty Ltd [2018] NSWSC 756 at [21] per Brereton J. 29 Section 1337H(2) confers a wide discretion to transfer proceedings where, "having regard to the interests of justice", it is "more appropriate" for the proceeding to be heard by the other court. The meaning of "the interests of justice" in the context of the transfer of proceedings has been considered on many occasions in different statutory schemes: see, in particular, BHP Billiton Ltd v Schultz [2004] HCA 61; 221 CLR 400. 30 Recent examples of the consideration of the transfer of proceedings from this Court to other courts under s 1337H(2) of the Corporations Act include Hancock Prospecting Pty Ltd v 150 Investments Pty Ltd [2017] FCA 520; 120 ACSR 495 per Yates J and Bell Group NV v Bell Group Finance Pty Ltd, Re Western Interstate Pty Ltd [2018] FCA 1440; 130 ACSR 586 per McKerracher J. Both of those decisions referred to the following guiding principles summarised by McKerracher J in Yara Pilbara Fertilisers Pty Ltd (formerly known as Burrup Fertilisers Pty Ltd) v Oswal (No 8) [2015] FCA 49 (in which his Honour transferred a proceeding to the Supreme Court of Victoria): [24] The leading authority which canvasses many of the issues to be taken into account is BHP Billiton Limited v Schultz (2004) 221 CLR 400. As the case law reflects, it is necessary to conduct a balancing exercise between relevant factors that inform as to whether or not it is in the interests of justice to transfer a proceeding. The weighing of considerations, such as cost, expense and convenience, even when they conflict, is a familiar aspect of the kind of case management involved in many cross-vesting applications: BHP per Gleeson CJ, McHugh and Heydon JJ (at [19]). While BHP considered the cross-vesting regime, for practical purposes the criteria for determining whether a proceeding should be transferred are broadly consistent with the criteria for determining cross-vesting: see Dwyer v Hindal Corporate Pty Ltd (2005) 52 ACSR 335 per Debelle J (at [13]). The question is essentially practical, or in the words used in BHP, it is essentially a 'nuts and bolts' management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute: BHP per Gleeson CJ, McHugh and Heydon JJ (at [13]); Bankinvest AG v Seabrook (1988) 14 NSWLR 711 per Street CJ (at 713-714). The 'interests of justice' is an expression to be interpreted broadly: BHP per Gleeson CJ, McHugh and Heydon JJ (at [15]). [25] The Court should not approach the transfer question with any presumption as to where the interests of justice lie: BHP per Gleeson CJ, McHugh and Heydon JJ (at [25]). It is not a circumstance in which an applicant has an onus of persuasion analogous to an onus of proof: BHP per Gummow J (at [71]). The disposition of an application for transfer of a proceeding does not require weight to be given to the plaintiff's choice of forum, which is essentially a neutral factor: BHP per Kirby J (at [168]) and per Gummow J (at 77). [26] As I noted in Commissioner of Taxation v Residence Riverside Proprietary Limited as Trustee for the D& J Discretionary Trust and as Trustee for the D& J Investment Trust [2013] FCA 720 (at [17]), this Court has previously recognised many factors as being relevant to the decision, which will vary in weight from case to case, including: (1) the stage of the proceedings in the respective courts; (2) the commonality or diversity of the parties; (3) the nature of the proceedings; (4) the commonality or diversity of issues; (5) the risk of conflicting findings of fact or conflicting orders; (6) a costs benefit analysis; (7) the potential unnecessary drain on judicial and other public and private resources; and (8) whether there is any particular judicial expertise residing in one court of the other. 31 An example of this Court transferring a proceeding to the Family Court under s 1337H(2) of the Corporations Act is the decision of Gyles J in Zhu v Tech Universal (HK-Macau) Development Pty Ltd [2005] FCA 256; 53 ACSR 704. The proceeding transferred involved an application for the winding up of a company on the grounds that there was a deadlock between the directors and shareholders of the company. However, proceedings had been on foot between the applicant and second respondent since 2000 in the Family Court relating to a maintenance and property settlement. It was common ground that the applicant and second respondent were the only shareholders in and directors of the company. In these circumstances, amongst others, Gyles J, after referring to the principles in Roff v Aqua Distributors Pty Ltd (1996) 21 Fam LR 138; 22 ACSR 248; 14 ACLC 1769 per Merkel J, ordered the transfer of the proceeding to the Family Court.

[19]

Application 32 In my view, this proceeding should be transferred to the Family Court as it is in the interests of justice for that Court to deal with this proceeding in addition to the Family Court proceeding. 33 I am satisfied that the Family Court has jurisdiction to hear the present proceeding pursuant to s 1337C(1) of the Corporations Act. I have also had regard to the matters specified in s 1337L, although paras (a) and (b) of that section have little relevance given the proceeding is to be transferred from one federal court to another (both of which have Melbourne-based registries). I am further satisfied that, having regard to the interests of justice for the purposes of s 1337H(2), this proceeding is more appropriately heard by the Family Court. I reach this conclusion for the following reasons: (1) the Family Court proceeding was commenced in 2017 and is substantially ready for trial. That proceeding was listed for trial in May 2020 and was only adjourned due to the COVID-19 pandemic and some late filing of material. In contrast, this proceeding was only recently commenced in this Court in March 2020; (2) the transfer of this proceeding to the Family Court will ensure that the plaintiffs in this proceeding can pursue their claims which need to be determined in conjunction with the claims raised by the second and third defendants in the Family Court proceeding. (In this regard, the Family Court is, broadly, only entitled to make an order altering property interests that bind a third party if the third party has been accorded procedural fairness in relation to the making of the order: s 90AE(3)(c) of the Family Law Act.) Significantly, the Deputy Commissioner, who apparently claims an interest in the Properties, is not a party to this proceeding but is a party to the Family Court proceeding; (3) the transfer of this proceeding to the Family Court will also avoid any potential Anshun or issue estoppel considerations arising against the parties to the proceedings. In this regard, I do not accept the plaintiffs' submission that any such estoppel would be advantageous to the conduct of the Family Court proceeding; (4) according to the Yeo affidavit, there is presently a Family Court order that the surplus moneys from the sale of the Balaclava and Elwood properties be paid into a controlled account; (5) I am satisfied that the interests of any third party shareholders or creditors will not be adversely affected if this matter is transferred to the Family Court, which has been conferred with jurisdiction in respect to civil matters arising under the Corporations legislation; (6) a practical "nuts and bolts" managerial approach dictates that the pursuit of the interests of justice favour the determination of this proceeding in the Family Court. Doing so will save unnecessary duplication of costs, and save valuable judicial and other public and private resources; (7) the determination of this proceeding in the Federal Court would not quell the whole of the controversy between the parties to this proceeding and the Family Court proceeding. As this Court does not possess general jurisdiction to determine the claims under the Family Law Act, those claims would still need to be determined by the Family Court (unless the Family Court proceeding was transferred to this Court: see ss 4(3) and 5(5) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) and Beaman v Bond [2013] FCA 534; 212 FCR 530 at [21]-[22] per McKerracher J); and (8) relatedly, to permit the proceeding to continue in this Court would result in a fragmentation of work, and the hearing of identical or similar issues, which is inefficient and not conducive to the just resolution of disputes as quickly, inexpensively and efficiently as possible: 37M of the Federal Court of Australia Act 1976 (Cth).

Yeo, in the matter of Armstrong and Shaw Pty Ltd (in liq) v Whiteman

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