FEDERAL COURT OF AUSTRALIA Rothmore Farms Pty Ltd (in liq) v Belgravia Pty Ltd [1999] FCA 127 ROTHMORE FARMS PTY LTD (IN LIQUIDATION) v BELGRAVIA PTY LTD (ACN 058 765 861), ANDREW CHARLES COOPER, AGRI-STEEL PTY LTD (ACN 083 806 179), TENNYSON TURNER, NOELENE MICHELLE COOPER and ROBERT JOHN MILLS SG 3019 OF 1998 MANSFIELD J ADELAIDE 25 MARCH 1999 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SG 3019 OF 1998 BETWEEN: ROTHMORE FARMS PTY LTD (IN PROVISIONAL LIQUIDATION) Applicant AND: BELGRAVIA PTY LTD (ACN 058 765 861) First Respondent ANDREW CHARLES COOPER Second Respondent AGRI-STEEL PTY LTD (ACN 083 806 179) Third Respondent TENNYSON TURNER Fourth Respondent NOELENE MICHELLE COOPER Fifth Respondent ROBERT JOHN MILLS Sixth Respondent JUDGE: MANSFIELD J DATE: 25 MARCH 1999 PLACE: ADELAIDE REASONS FOR DECISION HIS HONOUR: 1 Earlier today I allowed an amendment of the application and of the present amended statement of claim. For the purposes of understanding the case in the context in which that and other proposed applications were made, I invited counsel for the applicant to open the case and that application and the present applications were made at the completion of the opening. 2 There are two applications now made by the respondents. One is to strike out the proceedings. As I perceive it, that application is made on two general grounds. The first is that the proceedings are an abuse of process, and the second general ground is that in various respects the proceedings are said to be untenable. I will refer to the individual arguments in these reasons. The second application is for an adjournment of the proceedings. Again there seemed to be two grounds on which that application is brought. One is that the amendment allowed earlier today requires an adjournment in the interests of fairness, and the other is that the late delivery of material requires such an adjournment. Again, I will deal with those separately. 3 In respect of the application to strike out the proceedings on the ground of abuse of process, the first matter argued was that the applicant, through its provisional liquidator, misused the procedures for examination of certain members of the Cooper family under s 81 of the Bankruptcy Act 1966 (Cth) so as to procure from them evidence upon which ultimately, by the amended statement of claim acknowledged by the respondents to have been served on 26 November 1998, he was able to allege that they collectively intended to defraud, or participated in conduct directed to defrauding, creditors of the applicant company and conspired to do so, upon which he has invoked s 565 of the Corporations Law and s 86 of the Law of Property Act 1936 (SA). Prior to that time, as was pointed out, the application issued on 14 September 1998 was based upon a breach of s 588FA of the Law. It did not allege such conduct on the part of the respondents or any of them. In between the institution of the proceedings and the amendment, although there is no evidence of it, I am prepared to accept that in the period 14 July to 10 November 1998 various examinations were conducted pursuant to s 81 of the Bankruptcy Act 1966, which touched upon matters the subject of the amended statement of claim, as it was before the leave to amend was given today. I am not, however, satisfied on the material before me that there was a deliberate delay on the part of the applicant in instituting or in amending these proceedings whilst those examinations were conducted, and involving a misuse of the proper purpose of such examination, so as to constitute an abuse of the process of the Court. I simply do not have sufficient information upon which I could be satisfied that that is the case. One issue particularly addressed in this regard was the delay between the time fixed by the order made on 14 October 1998 directing that the statement of claim be provided within ten days, and the time when the statement of claim was filed, namely 20 November 1998, making the allegations identified above. There was no statement of claim when the proceedings were first instituted; the application was supported by affidavit under the Federal Court Rules. In between those two dates there was a further directions hearing on 11 November 1998, which extended the time for filing and service of the statement of claim until 20 November 1998. There was also a notice of motion by the applicant to amend the application to join the fifth and sixth respondents. It was in part at least because of that intention to amend the application to add additional respondents that the filing of the statement of claim and its service was extended on the second directions hearing on 11 November 1998. I do not draw any inference adverse to the applicant by reason of the time which elapsed between the original time fixed for the filing and service of the statement of claim and when that statement of claim was ultimately filed and served. It is also important to note that the same three transactions which have been identified in pars 14, 21, 22 and 25 of the pleadings have been the subject of the allegations at all points. Accordingly I reject the first submission. 4 The second submission ranged from a foreshadowed objection to the admissibility of evidence of the examinations conducted under s 81, based upon s 138 of the Evidence Act 1995 (Cth), to the way in which those examinations were conducted. The respondents suggested and that the conduct of those examinations demonstrates that the motives of the applicant in bringing these proceedings is an improper one. I do not decide on this application whether those examinations are admissible. There will clearly be a significant issue about that. I will have to address that at the time. If certain of the complaints which were put by way of submission are made out, it may be that there are good grounds to object to the admissibility of that material. I do not know. However, I regard it as a point which goes to the admissibility of evidence, rather than to demonstrating that the motive of the applicant in instituting and maintaining these proceedings is an improper one. The alleged misuse of the s 81 examinations does not (even if established) of itself demonstrate that the purpose of these proceedings is itself proper. 5 It is not to be lost sight of that the fundamental issue in these proceedings is whether the three transactions referred to were undertaken to avoid the exposure of the assets of the Jill Cooper Family Trust to the applicant company and, as seems to be common ground, in turn to the banks which provided funds for the operations of that trust while the applicant company was trustee. That issue needs to be determined. I see no material from which I can discern that the applicant, in making this application, is abusing the process of the Court for some ulterior purpose to that which is proper. In addition, at this point, the matter is assertive only, as no evidence of what in fact transpired at the examinations is before me. 6 It was further put that there was no evidence that the applicant had conducted any inquiries into the functions of the company Belgravia Pty Ltd, the first respondent, beyond its role as trustee of the Jill Cooper Family Trust. I do not think it follows, even if it were the case that the first respondent had a wider role, that the purpose of the applicant in instituting and maintaining these proceedings is other than the purpose of determining the issue which I have identified. In any event, in the course of opening, the applicant through the provisional liquidator indicated that it was aware of the possible issue that the first respondent's activities in operating an engineering business may be unrelated to the affairs of the trust, and I was told that evidence was to be adduced touching upon that very issue. 7 For those reasons, in my view, the first claim asserting an abuse of process by the applicant cannot succeed. 8 The other ground upon which the application is sought to be struck out raises matters concerning the fairness of the proceedings and of their sustainability. It also requires the several contentions to be separately addressed. There were, as I discerned them, four reasons put forward in support of that application. 9 The first is that the application, in so far as it is brought under s 565 of the Law, can only have a relation‑back day of six months from the date of the amended application when that section was invoked, that being six months from 20 November 1998, and that somehow therefore the application is out of time. I am not persuaded that that is correct. 10 Counsel for the applicant has pointed out that the winding-up commenced on 14 September 1998, and that it is arguable that the relation-back period relates to that time. I am not satisfied that the point is so strong that in the exercise of the powers which the Court has under O 20 of the Federal Court Rules it is appropriate to dismiss the proceeding on that basis. There are in any event other bases for the claims to which the proceeding gives rise. There is no special reason why, in my discretion, I should strike out that particular aspect of the foundation of the claim at this stage. It would not bring the proceedings to an end, nor significantly reduce the admissible evidence. 11 Similarly, I am not minded to accede to the submission that the argument (through the amendment allowed today) that the first respondent owed a fiduciary duty to the applicant is so unsustainable that it ought to be struck out. I appreciate there are, or appear to be, significant difficulties confronting the applicant in maintaining that proposition. They were adverted to in the course of argument on the amendment application. I am not satisfied that the point is so unarguable that I should at this point strike it out. In addition, there is no material which indicates, that leaving that argument for determination at the end of the case will prolong either the evidence or the submissions in any significant way. 12 Thirdly, it was put that the claim in so far as it is based upon s 86 of the Law of Property Act 1936 can only apply in relation to creditors of the second respondent and not to creditors of the applicant or to the applicant itself. It was also put that s 86(2) and/or s 88 of that Act protect the transactions in any event, because the transaction or at least certain of the transactions were for valuable consideration and in good faith. Those are matters of fact to be determined in the hearing. I am not persuaded that the position of the applicant is so hopeless on the material that has been relied upon on this application that I should strike out that part of the proceedings at this point. 13 Finally it was put that it was unfair for the present proceedings to be maintained with the allegations of what was categorised as criminal conduct, where no criminal prosecutions had been instituted. The applicant was called upon to lay charges, or to undertake not to do so. I reject that submission. It is not the role of the applicant or its provisional liquidator to lay criminal charges, nor is it within his power or the power of the applicant to undertake not to do so. Those matters are for prosecuting authorities under the relevant legislation of the State and the Commonwealth. It is appropriate, however, to observe that the allegations in the statement of claim, save for the issue of conspiracy, are allegations which take their words and their expression from the particular sections which give rise to the right to civil relief of the nature which is claimed. The fact that those allegations adopt those expressions from the statutory provisions does not, in my mind, necessarily involve any allegation of criminal conduct. To invoke the statutory causes of action does not impose upon the applicant any obligation to defer the prosecution of such claims unless and until somehow the prosecuting authorities have considered the possibility of instituting proceedings. In respect of the conspiracy allegation, the tort of conspiracy is a well‑recognised tort, albeit with some significant academic debate as to its proper function and as to its proper margins, but the use of that word in the pleading also does not in my view impose any obligation upon the applicant not to maintain that allegation in the present circumstances, nor does it, in respect of the respondents, produce any unfairness in the proceedings going forward in the way in which they are expressed. There is no indication that any prosecuting authority has any awareness of, or interest in, the allegations the subject of these proceedings. 14 In relation to the adjournment application, I have also considered the various matters which were put forward. For reasons which I expressed earlier in relation to allowing the amendment application, I do not accept the submission that the amendment allowed today creates an entirely different "ball game" (to use the words of counsel). It does not extend the scope of admissible evidence, but simply provides another alternative arguable basis for relief, based upon the evidence proposed to be led in any event. I do not see, therefore, any unfairness to the respondents in proceeding with the case. The facts to be ventilated remain the same as those before that amendment was allowed. 15 The other matter argued on this score concerned the late disclosure of certain proposed evidence, bearing in mind s 67 of the Evidence Act 1995. I have some sympathy for the respondents' position in that regard. Bearing in mind that we have now occupied nearly all of the first of two days presently available for hearing, and that counsel for the applicant has indicated an extensive range of evidence, some of which may require cross-examination, I do not propose to accede to the application on that ground at the present time. When and if the material only recently specifically identified is sought to be tendered, I will entertain an application for adjournment at that time, in the event that such evidence may produce unfairness to the respondents. It may be that we will occupy the available hearing time without that point having been reached. I therefore presently refuse that application. I give liberty to any of the respondents to renew it at a time at which they consider it necessary to do so. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield. Associate: Dated: Counsel for the Applicant: Mr R C White QC with him Mr G A Stevens Solicitors for the Applicant: Piper Alderman Counsel for the First, Second, Fifth and Mr D C Fitzgibbon Sixth Respondents: Solicitors for the First, Second, Fifth and Alderman Consultant Solicitors Sixth Respondents: Fourth Respondent appears in person and on behalf of Third Respondent Date of Hearing: 25 March 1999 Date of Decision: 25 March 1999