Zhu v Tech Universal

REASONS FOR JUDGMENT 1 On 11 March 2005 I ordered that this proceeding be transferred to the Family Court of Australia pursuant to s 1337H of the Corporations Act 2001 (Cth) (the Act). I said I would publish reasons later. These are those reasons. 2 This proceeding was commenced on 18 January 2005 by Zhi Yuan (Martin) Zhu (the applicant) seeking the winding up of Tech Universal (HK-Macau) Development Pty Limited (ACN 075 026 710) (the company) on the ground 'that there is a deadlock between the directors and shareholders of the company'. 3 On 16 February 2005 an amended originating process was filed by solicitors on behalf of the applicant which nominated s 459A and s 461(c) and (k) of the Act as the basis of the application. An Yong (Linda An), the former wife of the applicant, was named as the second respondent. 4 Proceedings have been on foot between the applicant and the second respondent since 2000 in the Family Court of Australia (SYF 6790 of 2000) effectively relating to maintenance and property settlement. It is common ground that the applicant and the second respondent are the only shareholders in and directors of the company. Orders were made by the Family Court on 4 September 2000 restraining the applicant in the way in which he could administer the company. The applicant's evidence is that the company effectively ceased trading thereafter. It certainly appears that there has been no trading for a considerable period. 5 On 18 January 2005 the solicitor for the second respondent applied orally to the Family Court for an order requiring her husband to consent to the transfer of this proceeding to the Family Court. Le Poer Trench J did not accede to that application, apparently because there had been no notice given of it and the husband's solicitor had no instructions, but his Honour said: 'I can see no good reason for the husband to oppose the transfer and it seems to me eminently sensible that the liquidation proceedings be heard in conjunction with the Family Court proceedings between the parties as the only shareholders and directors of the subject company are the husband and the wife. The ultimate benefit which might be available to the parties as a result of the winding up of the company will be an integral piece of information for the Family Law proceedings.' 6 On 18 February 2005 a motion to transfer the proceeding to the Family Court was filed on behalf of the second respondent. 7 The combined effect of s 1337C and s 1337H of the Act is that there is power to transfer the proceeding to the Family Court if it appears that, having regard to the interests of justice, it is more appropriate for the proceeding to be determined in that Court. There is authority as to the concept of the interests of justice in the context of both the general cross-vesting scheme and the previous corporations co-operative scheme in a variety of circumstances. It is a flexible concept not to be read down by paraphrase from other authorities. It is in the interests of justice that, as far as possible, all matters in controversy between parties may be completely and finally determined in the one proceeding and that multiplicity of proceedings be avoided (cfs 22 Federal Court of Australia Act 1976 (Cth)). 8 As might be expected the respective interests of these parties in the company are expressly in issue in the Family Law proceedings by virtue of the various orders that are sought and will need to be resolved by that Court. Adapting the reasons of Merkel J in the similar case of Roff v Aqua Distributors Pty Ltd (1996) 22 ACSR 248; 14 ACLC 1769; (1996) 21 Fam LR 138: · Although the issues in each proceeding are not identical there will be a substantial overlap. · It will be more efficient, less time consuming and less costly for the issues arising to be resolved in the one court. · The risk of inconsistent findings will be removed if the proceedings are heard and determined in the one court. · The Family Court, with its wide powers under the Family Law Act 1975 (Cth) in respect of property settlements, is well-equipped to resolve the ultimate dispute between the parties being the future conduct, ownership and control of the company; the resolution of that issue will be a critical element in determining matters arising under the Corporations Law. (See also Fox Enterprises Pty Ltd v Fox (1995) 123 FLR 445; (1995) 13 ACLC 573; Mattock v Mattock (1989) 97 FLR 112; (1989) 13 Fam LR 288; (1989) FLC 92-038; and Mourd v Atlantis Nominees Pty Ltd (1990) 100 FLR 478; (1990) 14 Fam LR 222.) 9 As Merkel J indicated in Roff, where the interests of third party shareholders or creditors are involved, it is necessary to take into account the circumstance that this Court is accustomed to dealing with the winding up of corporations whereas the Family Court is not. Where a company is trading actively on a substantial scale or where a real question of insolvency arises serious consideration would be required before a winding-up proceeding would be transferred to the Family Court. 10 In this case the company has not traded for a considerable time. There is no evidence of any trade creditors. The ground of insolvency was added by amendment. The only basis for that allegation in the evidence is the possibility of tax assessments being raised by a reopening of returns lodged a number of years ago based upon allegations by the applicant of deception of the Australian Taxation Office by the second respondent. That is an insubstantial basis for an allegation of insolvency. The allegation also appears to be very much entwined with the kind of claims and counter-claims between the parties which will fall for assessment by the Family Court. The only potential creditor identified is the Federal Commissioner of Taxation who is well able to protect the revenue no matter which court hears the proceeding. 11 As Merkel J said in Roff: 'I should add that even where third party interests are involved a transfer to the Family Court may nevertheless be appropriate in the interests of justice: see Re John Lawrence Sharpe, unreported, Lindgren J Federal Court of Australia 17 October 1996. In that case, notwithstanding that the transfer of a bankruptcy proceeding to the Family Court was opposed by the trustee in bankruptcy and some third party creditors, Lindgren J concluded that considerations of "efficiency and economy" and ultimately the "justice of the case" required its transfer to the Family Court.' 12 I therefore ordered the transfer of this proceeding to the Family Court. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.