Paulsen v Prohunt Holdings Pty Ltd [2007] FCA 1045

FEDERAL COURT OF AUSTRALIA

Paulsen v Prohunt Holdings Pty Ltd [2007] FCA 1045 RENITA PAULSEN v PROHUNT HOLDINGS PTY LIMITED (ACN 064 618 015), LYN PRICE AND NOIROT AUSTRALIA PTY LIMITED (ACN 104 528 805) NSD 1011 OF 2007

RARES J

12 JULY 2007

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1011 OF 2007

BETWEEN: RENITA PAULSEN

Plaintiff

AND: PROHUNT HOLDINGS PTY LIMITED (ACN 064 618 015)

First Defendant

LYN PRICE

Second Defendant

NOIROT AUSTRALIA PTY LIMITED (ACN 104 528 805)

Third Defendant

JUDGE: RARES J DATE OF ORDER: 3 JULY 2007

DATE OF REASONS: 12 july 2007

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The first defendant, Prohunt Holdings Pty Limited, be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth). 2. Peter Paul Krejci and Andrew Leonard Dunner be appointed as liquidators of the first defendant. 3. By consent the first defendant pay the plaintiff's costs of the proceedings. 4. The cross claim and notice of motion purporting to have been filed by the first defendant on 26 June 2007 be removed from and form no part of the file in these proceedings and be treated as never having been filed in the court. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1011 OF 2007

BETWEEN: RENITA PAULSEN

Plaintiff

AND: PROHUNT HOLDINGS PTY LIMITED (ACN 064 618 015)

First Defendant

LYN PRICE

Second Defendant

NOIROT AUSTRALIA PTY LIMITED (ACN 104 528 805)

Third Defendant

JUDGE: RARES J

DATE: 12 JULY 2007

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 25 June 2007 my associate was approached in chambers for leave to file, in fresh proceedings, a notice of motion and application by the first defendant in these proceedings, Prohunt Holdings Pty Limited, against the plaintiff, Ms Paulsen, and two others, Renski Pty Limited and Warren Hunter. A draft notice of motion and application were provided with a copy of a letter to the solicitors acting for Ms Paulsen. 2 Ms Paulsen's interlocutory process for the appointment of a provisional liquidator to Prohunt had been listed before me at 2.15pm on 29 June 2007. The draft order sought an order granting leave to Prohunt to file and serve the attached application and notice of motion to be returnable at the same time as the interlocutory process with consequential directions. The draft application sought relief in respect of a number of matters the subject of affidavits which were described as not yet being sworn. I was not provided with any draft or actual affidavits in support. 3 The notice of motion sought an order under s 1322(4)(a) of the Corporations Act 2001 (Cth) declaring that the institution of the proceeding in the name of the applicant (Prohunt) was not invalid and that the applicant had leave to commence and continue the proceedings in the name of the applicant against the respondents. A number of other orders were sought on an interlocutory basis in relation to a claimed misuse by the proposed respondents of Prohunt's confidential information. 4 Early on 26 June 2007 my associate notified the parties that I would hear Prohunt's application to file a notice of motion at 2.15pm that day, I having indicated through my associate on the previous evening that I was not prepared to grant leave in chambers without evidence. Later that morning my associate was informed that Prohunt had withdrawn its application to file a notice of motion and I vacated the appointment for hearing. In lieu, I was asked to grant leave in chambers to Prohunt, as first defendant in these proceedings, to file by later that day a cross claim and any application for interlocutory relief in respect of the cross claim together with any affidavits in support. I then made the following orders in these proceedings: 'THE COURT: 1. Grants leave to the first defendant to file and serve a cross claim and any application for interlocutory relief in respect of the cross claim by way of notice of motion, together with any affidavits in support of the motion, on or before 26 June 2007. 2. Makes any motion filed pursuant to the leave granted in order 1 returnable at 2:15 pm on 29 June 2007.' 5 At no time was an application made in these proceedings for, nor did I make, any order under s 1322(4)(a) of the Act. That section authorises the Court, on application by an interested person, to make an order declaring that any act, matter or thing purporting to have been done, or proceeding purporting to have been instituted or taken, under the Act or in relation to a corporation was not invalid by reason of any contravention of a provision of the Act or a provision of the constitution of the corporation. Nonetheless, the solicitors for the second and third defendants, Mr Price and Noirot Australia Pty Limited, who also asserted that they acted on behalf of Prohunt, filed a cross claim in the name of Prohunt joining Ms Paulsen, Renski and Mr Hunter as cross respondents together with a notice of motion seeking interlocutory relief against them. 6 When the hearing commenced on 29 June 2007, Ms Paulsen's senior counsel objected to the authority of those purporting to act on behalf of Prohunt to do so. He pointed to the apparent deadlock on the board of Prohunt referred to in the evidence. Ms Paulsen and Mr Price were the only two directors of Prohunt, and they were parties to the proceedings and clearly in dispute. Senior counsel for Ms Paulsen pointed out, correctly, that in those circumstances no resolution of the board of Prohunt had been made to authorise the filing or institution of the cross claim and notice of motion by Prohunt. Nor did the leave which I granted to Prohunt authorise or provide any basis on which Mr Price, Noirot or those associated with them had authority to file the cross claim and notice of motion on its behalf. He argued that if Mr Price, Noirot and their associates sought to proceed on behalf of Prohunt in accordance with the notice of motion and to rely upon the cross claim, they would have to establish a legal basis for doing so, whether pursuant to leave under s 1322(4)(a) or otherwise. 7 In the event, the interlocutory hearing proceeded to the point that I ordered the parties to engage in a mediation before a registrar on the following Monday, 2 July 2007. Consequent upon the mediation, the parties agreed that liquidators should be appointed to Prohunt under the just and equitable ground (s 461(1)(k) of the Act) in light of the deadlock between the members of the board and the shareholders which had been revealed in the evidence. They also agreed that Prohunt should pay Ms Paulsen's costs. 8 Ms Paulsen then applied for the cross claim to be removed from the record of the Court on the basis that there had been no authority to file it. Junior counsel for Mr Price and Noirot said that he had taken the view that when I granted leave to the first defendant (Prohunt) to file a cross claim and notice of motion, there was no longer any need to pursue an application under s 1332(4)(a) authorising the filing of documents in the name of Prohunt. 9 My order was, in terms, facultative. It permitted a cross claim and notice of motion to be filed by Prohunt and made returnable at the hearing that had already been set down for Ms Paulsen's interlocutory process for the appointment of a provisional liquidator to Prohunt. 10 If Prohunt were not able properly to instruct solicitors, the leave I granted could not be acted upon by it. It appears that those purporting to act for Prohunt were proceeding upon a misapprehension that by granting leave to file the documents I was in some way making an order validating steps they wanted to take in Prohunt's name. This was notwithstanding that I had already indicated that I was not prepared to make the orders sought to bring the proposed new proceedings on the basis that there was no evidence before me. 11 Mr Price, Noirot and their associates could not bring proceedings in the ordinary course in the name of Prohunt when they knew that Ms Paulsen had not authorised that to be done. No basis was advanced by them, other than to point to the order granting leave to Prohunt, which could have authorised Mr Price and Noirot to use the name of Prohunt in filing the cross claim and notice of motion. Nor had they sought an order regularising their acting on Prohunt's behalf in the proceedings or elsewhere. The order made on 26 June 2007 permitted Prohunt, not other persons in its name, to file a cross claim and notice of motion. 12 For these reasons it appeared to me to be appropriate to make the consent orders and to order that the cross claim and notice of motion purportedly filed on 26 June 2007 form no part of the file and be treated as never having been filed. The effect of this will be to preserve the parties' rights, and those of the liquidators whom I appointed, to pursue whatever matters were sought to be agitated in the cross claim and notice of motion to the extent, if any, they consider appropriate. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.