FEDERAL COURT OF AUSTRALIA Rafferty v Time 2000 West Pty Ltd (No 6) [2011] FCA 402 Citation: Rafferty v Time 2000 West Pty Ltd (No 6) [2011] FCA 402 Parties: PATRICK CAMPBELL RAFFERTY, SANTORA HOLDINGS PTY LTD ACN 128 467 550 and KARAVILLE HOLDINGS PTY LTD ACN 009 439 178 v TIME 2000 WEST PTY LTD ACN 127 893 270, TIME 2000 SYSTEMS (AUSTRALIA) PTY LTD ACN 127 853 614, TIME 2000 OPERATIONS (AUSTRALIA) PTY LTD ACN 128 700 541, EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG), STEPHEN GERARD DONOVAN and MADGWICKS File number: SAD 122 of 2008 Judge: LANDER J Date of judgment: 14 April 2011 Date of hearing: 14 April 2011 Place: Adelaide Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 23 Counsel for the Applicants: Mr J Cudmore Solicitor for the Applicants: Cosoff Cudmore Knox Counsel for the Third and Fifth Respondents: Mr A Dal Cin Solicitor for the Third and Fifth Respondents: Pace Lawyers IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 122 of 2008 BETWEEN: PATRICK CAMPBELL RAFFERTY First Applicant SANTORA HOLDINGS PTY LTD ACN 128 467 550 Second Applicant KARAVILLE HOLDINGS PTY LTD ACN 009 439 178 Third Applicant AND: TIME 2000 WEST PTY LTD ACN 127 893 270 First Respondent TIME 2000 SYSTEMS (AUSTRALIA) PTY LTD ACN 127 853 614 Second Respondent/Second Cross Claimant TIME 2000 OPERATIONS (AUSTRALIA) PTY LTD ACN 128 700 541 Third Respondent/Third Cross Claimant EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG) Fourth Respondent/Fourth Cross Claimant STEPHEN GERARD DONOVAN Fifth Respondent/First Cross Claimant MADGWICKS Sixth Respondent/Cross Respondent JUDGE: LANDER J DATE OF ORDER: 14 april 2011 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. On the application of the first applicant, (Mr Rafferty), a garnishee summons be filed and served on the National Australia Bank Limited ACN 004 044 937 ('NAB') as garnishee in the form of the annexure hereto. 2. The orders made herein on 25 August 2010 be varied to the extent that is necessary to enable NAB as garnishee to pay $95,862 from account number 083427-163861737 held in the name of the first defendant, Time 2000 West Pty Limited to the first applicant but otherwise the orders made on that date continue in full force and effect. 3. The garnishee summons issued to NAB as garnishee be adjourned for mention to 2 May 2011 at 9.30am. 4. The application by the third and fifth respondents to intervene under section 236 of the Corporations Act 2001 (Cth) for the purpose of taking responsibility on behalf of the first respondent, Time 2000 West Pty Limited, be dismissed. 5. The third and fifth respondents pay the first applicant's costs in relation to the application to intervene fixed in the sum of $2,700, payable forthwith. 6. The Notice of Appearance purportedly filed on 13 April 2011 by Pace Lawyers be struck out. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 122 of 2008 BETWEEN: PATRICK CAMPBELL RAFFERTY First Applicant SANTORA HOLDINGS PTY LTD ACN 128 467 550 Second Applicant KARAVILLE HOLDINGS PTY LTD ACN 009 439 178 Third Applicant AND: TIME 2000 WEST PTY LTD ACN 127 893 270 First Respondent TIME 2000 SYSTEMS (AUSTRALIA) PTY LTD ACN 127 853 614 Second Respondent/Second Cross Claimant TIME 2000 OPERATIONS (AUSTRALIA) PTY LTD ACN 128 700 541 Third Respondent/Third Cross Claimant EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG) Fourth Respondent/Fourth Cross Claimant STEPHEN GERARD DONOVAN Fifth Respondent/First Cross Claimant MADGWICKS Sixth Respondent/Cross Respondent JUDGE: LANDER J DATE: 14 april 2011 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This is an application for the issue of a garnishee summons to be served on the National Australia Bank Limited (NAB), in respect to a sum of $95,862 held by the NAB in an account in the name of the first respondent, Time 2000 West Proprietary Limited. 2 The principal proceeding was commenced by three applicants against five respondents and a further respondent was added later and during the proceeding. The first applicant controls the second and third applicants, the fifth respondent controls the second and third respondents, and the first respondent is under the directorship of the first applicant and the fifth respondent. The sixth respondent, for this purpose of this application, is irrelevant. The first respondent has as its directors, the first applicant and the fifth respondent, who are also both of its members. The first respondent did not file an appearance in the proceeding and has hitherto taken no interest in the proceeding. 3 When the proceeding commenced the first respondent had a bank account, number 083427-163861737 with the National Australia Bank, in which there was deposited a sum in excess of $100,000. At some time during the course of the proceeding – and it does not matter much when for the purpose of these reasons – the directors, by their lawyers, agreed that the funds standing to the credit of the first respondent would not be paid out of the NAB, without the consent of both directors. Again, at some stage – and again, it does not matter when – the NAB was advised not to pay the funds out, except with the consent of both directors. 4 On 5 July 2010, Besanko Js associate advised the parties that his Honour intended to give judgment in the principal proceeding on 13 July 2010. On that same day the fifth respondent, Mr Donovan, caused the first respondent to pay, out of the fund with the NAB, the sum of $95,862 to a firm of accountants, Deloitte Touche Tohmatsu. Notwithstanding the instruction which had been given to NAB not to pay the moneys out without the consent of both directors, NAB paid the sum to Deloitte Touche Tohmatsu. After payment of that sum the balance of the account was in the sum of $7303.63. 5 In a later proceeding before me in relation to a freezing order which had been made by Besanko J which a non-party controlled by Mr Donovan has sought to have discharged, Mr Donovan said under cross-examination that he was unaware of the agreement between the parties' lawyers at the time that he caused the moneys to be paid out of the bank account with the NAB and to Deloitte Touche Tohmatsu. 6 Justice Besanko delivered his reasons on 13 July, in which he indicated that the applicants should succeed against the first, second, fourth and fifth respondents, but fail as against the sixth respondent and the applicants should succeed on a cross-claim brought by the third respondent. His Honour, however, did not enter orders on that day, but indicated that he would hear the parties in relation to the orders to be made. 7 On 17 August, his Honour delivered further reasons for the orders which he made that day. In those reasons his Honour rejected an application made by the applicants that a receiver ought to be appointed to the assets of the first respondent, but instead, ordered that the first respondent be responsible for the money sum, to which I will shortly refer. 8 On 17 August, his Honour made a number of orders first, setting aside various agreements which were the subject matter of the proceeding and secondly, and more importantly, as far as this proceeding is concerned, an order that the first, second, fourth and fifth respondents, jointly and severally, pay to the applicants the following moneys: (a) As to the first applicant, the sum of $200,000; and (b) As to the third applicant, the sum of $1.5 million. 9 He also ordered that the first, second, fourth and fifth respondents pay the applicants interest of $416,111.29 and made consequential orders if such payments were made. He made orders that the second and fourth respondents pay the applicants' costs after 30 January 2009 on an indemnity basis, and the fifth respondent pay those costs after 31 August 2009. 10 An appeal from his Honour's orders was instituted on 7 September 2010 by the second, third, fourth and fifth respondents. The first respondent, who did not appear in the proceeding, has not appealed and has not sought for the order for the payment of moneys totalling $1.7 million to the applicants be set aside. The appellants have sought orders, as against the applicants, that the appeal be allowed and the orders made by his Honour on 17 August be set aside and that the claims of the applicants be dismissed. They have sought other orders in relation to the sixth respondent that are unimportant. The appeal was heard in the February sittings but has not yet been decided. 11 After judgment was entered the first applicant sought, pursuant to s 236 of the Corporations Act 2001 (Cth) (the Corporations Act), to bring a proceeding on behalf of the first respondent against NAB to recover the sum of $95,862 paid out on 5 July. On 2 March 2011, Mansfield J authorised the making of that application. The result of that application was that a sum of $95,862 has been returned to the account of the NAB, in circumstances which have not been disclosed to the Court because they are confidential. The inference must be, however, that the moneys have been credited to the account by NAB as a result of the proceeding brought by the first applicant under s 236 of the Corporations Act. 12 The second process issued by the first applicant after judgment was to seek a garnishee order against the NAB in the sum of $7303.63, which was the amount left in the account after the debit of $95,862 on 5 July and before the crediting of the same sum. The Court made an order that a garnishee summons issue to the NAB and as a result, in response to that summons, the bank paid to the first applicant a sum of $7303.63. The evidence before me is that that is the only sum which has been paid to the first applicant in satisfaction of the judgment entered by his Honour on 17 August 2011. On 27 August 2010 the third applicant recovered a sum of $344,584.27 in a garnishee proceeding against the Commonwealth Bank Limited in partial satisfaction of its judgment. The application which is before me today is for the issue of a further garnishee summons directed to NAB for NAB to pay the sum of $95,862 to the first applicant in further partial satisfaction of the judgment against the first respondent in favour of the applicants. I am satisfied that that amount is remaining outstanding under the orders made by Besanko J on 17 August 2010. 13 The matter first came before me on Tuesday, 12 April when Mr Esau, a solicitor, appeared for the first respondent. He did not make clear at the time his authority for such an appearance, but nor was he asked. Orders were made at the hearing that the first respondent file an appearance and any affidavit upon which it intended to rely in opposition to the application. The application was adjourned until today. The first respondent did not file an appearance and shortly after the hearing Mr Esau ceased to act for the first respondent. His authority to appear on 12 April 2010 therefore remains underdetermined but as events have occurred, his authority to act is not so important. 14 Shortly before the hearing today, Pace Lawyers filed what purported to be a notice of appearance. The notice did not comply with the rules inasmuch as it failed to identify the parties for whom the notice was purporting to appear. However up to that point in time, the only respondent which had not appeared in the proceedings was the first respondent. When the matter came on for hearing today, Mr Dal Cin as counsel announced that he was instructed by Pace Lawyers to act for the third respondent and the fifth respondent, both of whom sought to make an application pursuant to s 236 of the Corporations Act for leave to intervene in the proceedings on behalf of the first respondent to oppose the application for the issue of the garnishee summons. The third respondent is a member of the first respondent and the fifth respondent is one of the two directors of the first respondent. The third and the fifth respondents are represented in the proceeding by Cowell Clarke. Effectively, Mr Dal Cin was seeking to represent the same parties on instruction from solicitors who were not the solicitors on record for those parties. 15 Mr Dal Cin contended that he should be permitted to appear because the application which he sought to make to intervene was different from the interests of the third and fifth respondents in the principal proceeding. He said in those circumstances he should be entitled to be heard on behalf of those parties in support of the application that they be granted an order that the company intervene in the proceeding. Having regard to the extraordinary costs to which the parties have been put in relation to this proceeding, the appeal, and the interlocutory applications which have followed the appeal, this matter ought to be decided as early as possible. I have therefore not had the opportunity of considering whether Mr Dal Cin is entitled to represent those parties in circumstances where he is on instructions from solicitors who are not the solicitors on record, but I will assume such an entitlement for the purpose of dealing with the substantial application. 16 Section 237 of the Corporations Act permits a person referred to in s 236(1)(a), who is a member or officer of a company, to apply to the Court for leave to intervene in proceedings in which that company is a party. Section 237(2) empowers the Court to grant the application for intervention if it is satisfied that it is probable that the company will not itself properly take responsible for the proceedings, and that the applicants are acting in good faith, and that it is in the best interests of the company that the applicants be granted leave. Section 237(1)(e) requires as a precondition that at least 14 days before making the application the member or the director or officer who intends to apply give written notice to the company of the intention to apply for leave and the reasons for applying. I think, however, that s 237(1)(e) would not disqualify a member or an officer making an application under s 237 to intervene in circumstances of urgency, and I will proceed upon that basis. 17 Mr Dal Cin argued that the third and fifth respondents should be entitled to intervene for the purpose of taking responsibility on behalf of the first respondent and opposing the application made by the first applicant. The first applicant seeks the issue of a garnishee summons to NAB for the payment of $95,862. I think there are considerable difficulties in the application to intervene. First, in my opinion, it is not clear that the first respondent has any argument that could be proffered in opposition to the application for the issue of the garnishee summons. Secondly, it might be difficult for the Court to be satisfied that at least the fifth respondent is acting in good faith when it was the fifth respondent who caused the sum of $95,862 to be paid out of the account of the first respondent to the accountants, contrary to the agreement of his solicitors and the applicants' solicitors. Thirdly, it is not obvious to me that it is in the interests of the company that the third and fifth respondents be granted leave. 18 Mr Dal Cin said in support of his clients' application to be granted leave that the first respondent is entitled to resist this application for two reasons: first, because the application is brought by the first applicant, who is a director of the first respondent; and secondly, because an appeal has been brought and heard and should be decided shortly. The first argument, it seems to me, confuses, with respect, the roles of the parties. The applicants as between themselves are entitled to decide how they will go about collecting the judgment sum. The first and third applicants, who are the judgment creditors, could have each brought this application or they could have agreed between themselves that one of them bring the application because payment to one of them will be discharge the liability to both of them. If the garnishee summons were to issue and NAB responded by paying the sum to the first applicant, the effect of that payment would be to discharge the first respondent's liability to the third applicant because of the joint and several liability of the judgments. 19 The fact that the first applicant is also a director of the first respondent is, in my opinion, irrelevant to the application. If he and Mr Donovan were not at arm's length, which they are, and not in disagreement, which they are, apart from applying for a stay there is nothing that the first respondent could do in answer to the judgment creditor's application. The applicants are entitled to recover the judgment unless a stay is granted. There is no stay. The applicants are entitled to the judgment. 20 The second ground effectively was a de facto application for a stay in circumstances where none of the parties have sought a stay. Since the judgment was entered, the applicants have issued a bankruptcy notice directed to the fifth respondent. The fifth respondent sought to have the bankruptcy notice set aside or compliance with that notice extended until the appeal was determined. However, Registrar Christie dismissed that application. Subsequently, a creditor's petition has been issue for the sequestration of the fifth respondent's estate. 21 It seems to me that it would not be appropriate to give the third and fifth respondents leave to intervene for the purpose of making a de facto stay application on behalf of the first respondent in circumstances where none of the respondents have sought such a stay. It therefore follows that, in my opinion, leave to intervene should be refused because the granting of leave would serve no utility. The application, therefore, by the third and fifth respondents to intervene is dismissed. The third and fifth respondents must pay the costs of the first applicant in relation to their application to intervene under s 236 of the Corporations Act. 22 I have said that I will make an order that the third and fifth respondents pay the costs of their application to intervene. Mr Cudmore has now applied for two orders under O 62: first, that the costs be payable forthwith and that O 62 r 3(3) have no effect; and secondly, that I fix the amount of the costs. It seems to me that it would be in everyone's interest that the costs be fixed and they be payable forthwith so as to bring these matters to an end as soon as possible. I am prepared to make an order that the costs be payable forthwith. Mr Cudmore has said in support of the amount of the costs that I should order a counsel fee of $1,500 and solicitors' fees of $1,200 representing four hours work of a solicitor. In my opinion the costs which are sought are reasonable. There will be an order that the third and fifth respondents pay the first applicant's costs which I fix at $2,700 forthwith. 23 There seems to me no reason why I should not make the orders which are sought by the first applicant. I am satisfied that a judgment sum in excess of the amount sought to be recovered under the garnishee summons is presently owing, I am satisfied that the sum of $95,862 is standing to the credit of the first respondent with the NAB in the account number to which I have referred, and for those reasons I make the following orders. 1. On the application of the first applicant, (Mr Rafferty), a garnishee summons be filed and served on the National Australia Bank Limited ACN 004 044 937 ('NAB') as garnishee in the form of the annexure hereto. 2. The orders made herein on 25 August 2010 be varied to the extent that is necessary to enable NAB as garnishee to pay $95,862 from account number 083427-163861737 held in the name of the first defendant, Time 2000 West Pty Limited to the first applicant but otherwise the orders made on that date continue in full force and effect. 3. The garnishee summons issued to NAB as garnishee be adjourned for mention to 2 May 2011 at 9.30am. 4. The application by the third and fifth respondents to intervene under section 236 of the Corporations Act 2001 (Cth) for the purpose of taking responsibility on behalf of the first respondent, Time 2000 West Pty Limited, be dismissed. 5. The third and fifth respondents pay the first applicant's costs in relation to the application to intervene fixed in the sum of $2,700, payable forthwith. 6. The Notice of Appearance purportedly filed on 13 April 2011 by Pace Lawyers be struck out. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate: Dated: 21 April 2011 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. SAD 122 of 2008 PATRICK CAMPBELL RAFFERTY First Applicant SANTORA HOLDINGS PTY LIMITED ACN 128 467 550 Second Applicant KARAVILLE HOLDINGS PTY LIMITED ACN 009 439 178 Third Applicant TIME 2000 WEST PTY LIMITED ACN 127 893 270 First Respondent TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614 Second Respondent/Second Cross Claimant TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541 Third Respondent/Third Cross Claimant EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG) Fourth Respondent/Fourth Cross Claimant STEPHEN GERARD DONOVAN Fifth Respondent/First Cross Claimant MADGWICKS Sixth Respondent/Cross-Respondent GARNISHEE SUMMONS BETWEEN PATRICK CAMPBELL RAFFERTY Judgment Creditor and TIME 2000 WEST PTY LIMITED ACN 127 893 270 Judgment Debtor and NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937 Garnishee TO: The Proper OfficerNational Australia Bank Limited ACN 004 044 937Level 4 (UB 4440)800 Bourke StreetDOCKLANDS VIC 3000 (the 'garnishee') You are summoned to attend before the Court on the hearing of an application by the judgment creditor for an order that you, the garnishee, pay to the judgment creditor the debt due from you to the judgment debtor or so much thereof as may be sufficient to satisfy a judgment recovered against the judgment debtor by the judgment creditor in the Court on 17 August 2010 for $200,000.00, together with pre-judgment interest of $416,111.29. The sum required to satisfy the judgment, interest and costs is $192,696.37 together with pre-judgment interest of $416,111.29, being the amount due and unpaid under the judgment. The debt in respect of which this summons is filed and served is the monies held by the judgment debtor, Time 2000 West Pty Limited ACN 127 893 270, in account number 083427-163861737 with the garnishee, National Australia Bank Limited. The branch of the garnishee institution at which the judgment debtor's account is believed to be held is 600 Chapel Street, South Yarra, in the State of Victoria. This summons is filed and served by order of the Court made on April 2011 The application will be heard before the Judge in the Federal Court of Australia 3 Angus Street, Adelaide SA 5000 on 2011 at am/pm or so soon afterwards as the business of the Court allows. TAKE NOTICE that upon service of this summons the debt shall be bound in your hands to the extent of $95,862.00 to answer the sum of $608,807.66 required to satisfy the judgment and pre-judgment interest. ..............................................................