PFD Food Services Pty Ltd v NAFDA Pty Ltd [2003] FCA 682

FEDERAL COURT OF AUSTRALIA

PFD Food Services Pty Ltd v NAFDA Pty Ltd [2003] FCA 682 PFD FOOD SERVICES PTY LTD (ACN 006 972 381) & ORS v NAFDA PTY LTD (ACN 002 953 942) V 763 of 2002 RYAN J 7 JULY 2003 MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 763 of 2002

BETWEEN: PFD FOOD SERVICES PTY LTD (ACN 006 972 381) & ORS (in accordance with annexed Schedule)

Applicants

AND: NAFDA PTY LTD (ACN 002 953 942)

Respondent

JUDGE: RYAN J

DATE OF ORDER: 7 JULY 2003

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The applicants have leave by 21 July 2003 to amend their statement of claim in such manner as they may be advised in light of the reasons for judgment published this day. 2. The amended motion on notice dated 28 March 2003 be adjourned to 6 August 2003. 3. The costs of all parties of the hearing on 31 March 2003 be reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 763 of 2002

BETWEEN: PFD FOOD SERVICES PTY LTD (ACN 006 972 381) & ORS (in accordance with annexed Schedule)

Applicants

AND: NAFDA PTY LTD (ACN 002 953 942)

Respondent

JUDGE: RYAN J

DATE: 7 JULY 2003

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 This application concerns an alleged co-operative arrangement for the wholesale purchasing of food products on behalf of various entities carrying on business as wholesalers of frozen food. The applicants contend that this arrangement was purposefully structured using a cooperative company so as to claim certain taxation benefits, to negotiate favourable terms with suppliers on behalf of its member businesses and to generate profits for its members in various other ways. The difficulty that gives rise to the respondent's present application that this Court should dismiss or strike out the proceedings arises from the corporate structure chosen to implement the alleged co-operative arrangements. The company within the corporate structure that ultimately negotiated discounts and obtained favourable taxation treatment is NAFDA Pty Ltd ("NAFDA"), and the only members of that company are NAFDA (NSW) Pty Ltd ("NAFDA (NSW)") and NAFDA (VIC) Pty Ltd ("NAFDA (VIC)"). The applicants in the present case are several of the business entities that came together to form the alleged co-operative, and each was a member only of NAFDA (NSW) or NAFDA (VIC), which companies are effectively interposed between the applicants and NAFDA, the respondent. The essence of the applicants' case is that NAFDA existed to distribute its profits to the members of NAFDA (NSW) and NAFDA (VIC), and did so except in the financial year 2001, when, it claims, NAFDA retained $569,074 which should have been distributed as an "extraordinary income dividend" to the members of NAFDA (NSW) and NAFDA (VIC), as the applicants were at that time.