FEDERAL COURT OF AUSTRALIA Breakfast Investments Pty Ltd, in the matter of Ambridge Investments Pty Ltd (in liq) (Receiver Appointed) v The H2O Company Pty Ltd [2012] FCA 151 Citation: Breakfast Investments Pty Ltd, in the matter of Ambridge Investments Pty Ltd (in liq) (Receiver Appointed) v The H2O Company Pty Ltd [2012] FCA 151 Parties: BREAKFAST INVESTMENTS PTY LTD (ACN 090 648 990) v THE H20 COMPANY PTY LTD (ACN 006 770 510), GREGORY STUART ANDREWS (IN HIS CAPACITY AS RECEIVER OF AMBRIDGE INVESTMENTS PTY LTD) and HEADLAND PROPERTIES PTY LTD (ACN 006 632 506) File number: VID 1175 of 2010 Judge: NORTH J Date of judgment: 30 January 2012 Date of hearing: 30 January 2012 Place: Melbourne Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 10 Counsel for the Applicant: The Applicant did not appear Solicitor for the First and Third Respondents: Mr H Obst of Obst Legal Solicitor for the Second Respondent: Mr A Foster of Foster Nicholson Jones IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1175 of 2010 IN THE MATTER OF AMBRIDGE INVESTMENTS PTY LTD (IN LIQUIDATION) (RECEIVER APPOINTED) (ACN 077 299 051) BETWEEN: BREAKFAST INVESTMENTS PTY LTD (ACN 090 648 990) Applicant AND: THE H20 COMPANY PTY LTD (ACN 006 770 510) First Respondent GREGORY STUART ANDREWS (IN HIS CAPACITY AS RECEIVER OF AMBRIDGE INVESTMENTS PTY LTD) Second Respondent HEADLAND PROPERTIES PTY LTD (ACN 006 632 506) Third Respondent JUDGE: NORTH J DATE OF ORDER: 30 JANUARY 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The proceeding is dismissed. 2. The applicant pay the respondents' costs of the proceeding Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1175 of 2010 IN THE MATTER OF AMBRIDGE INVESTMENTS PTY LTD (IN LIQUIDATION) (RECEIVER APPOINTED) (ACN 077 299 051) BETWEEN: BREAKFAST INVESTMENTS PTY LTD (ACN 090 648 990) Applicant AND: THE H20 COMPANY PTY LTD (ACN 006 770 510) First Respondent GREGORY STUART ANDREWS (IN HIS CAPACITY AS RECEIVER OF AMBRIDGE INVESTMENTS PTY LTD) Second Respondent HEADLAND PROPERTIES PTY LTD (ACN 006 632 506) Third Respondent JUDGE: NORTH J DATE: 30 JANUARY 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Before the Court is an interlocutory application filed by the second respondent, Gregory Stewart Andrews, in his capacity as receiver of Ambridge Investments Pty Ltd (Ambridge). He seeks orders that the application be dismissed with costs on the grounds that the application has no reasonable prospect of success and, alternatively, that the proceeding is an abuse of process of the Court pursuant to r 26.01(1)(a) and (d) of the Federal Court Rules 2011 (Cth) respectively. 2 The abuse of process application is a curious one. The applicant claims, under s 418A(2) of the Corporations Act 2001 (Cth), that it is a creditor of Ambridge and consequently has standing to set aside a registered debenture charge granted by Ambridge initially to the Commonwealth Bank of Australia Ltd and ultimately assigned to the first respondent. 3 The second respondent contends that the applicant has no interest to challenge the validity of the debenture charge. Rather the applicant is being used by two directors of the applicant to have the debenture charge set aside in order for interests associated with those directors to gain priority for their own debenture over the assets of Ambridge. In those circumstances, it is said by the second respondent that the proceeding is an abuse of process by the applicant because it has nothing to gain from the application. 4 I am not persuaded that this is an available basis to dismiss the application. If the applicant has a right under s 418A to challenge the validity of the debenture charge, then it is not an abuse of process for it to pursue that right. It may have other interests of its own in exercising the right under s 418A. 5 There is more substance in the ground that there is no reasonable prospect of the applicant successfully prosecuting the proceeding. 6 The applicant is the legal owner of a property in Wellington Street, North Melbourne. Litigation in the Supreme Court of Victoria has recently determined that it holds 25 per cent of the beneficial interest in that property on behalf of Ambridge and as the manager of a joint venture between a number of joint venturers. The board of the applicant now represents each of the joint venturers. Two members of the board, Mr Greg Taylor and Mr Gene Taylor, appointed by the Supreme Court as a result of those proceedings, represent the interests of Ambridge. The other directors represent the interests of the other joint venturers. Those other directors are said to have an interest in setting aside the debenture charge in order that companies associated with them would have priority in relation to the assets of Ambridge. As a result of that alignment of interests, there is a deadlock on the board concerning the continuation of this proceeding. 7 I am told from the bar table that the board is otherwise functioning, but that it is not in a position to take any further steps in this proceeding as a result of the difference in view between the directors. So much has been evidenced by the recent developments in these proceedings. 8 In order to resolve the conflict, the board agreed for a third party to appoint solicitors to act on behalf of the applicant. That process was undertaken and led to the offer to a firm of solicitors to act on behalf of the applicant. The firm of solicitors then refused to act on the basis of the deadlock on the board and the consequent inability to obtain clear instructions about the further conduct of the proceedings. These events occurred over a series of months during which directions hearings were conducted. As a result of these events, directions hearings were adjourned serially between 10 October 2011 and 13 December 2011. By 13 December 2011, the firm of solicitors which had been appointed had declined to act and therefore the proceeding was adjourned to 22 December 2011 in anticipation that new solicitors would be appointed by that date. On that date no new solicitors had been appointed and the applicant did not appear. As a result, the matter was adjourned until today. 9 The stalemate on the board has meant that several pending applications have not been progressed. For example the second respondent has applied for an order that the matter be dismissed on the basis that the applicant has no standing to bring the application because it is not a creditor of Ambridge. Further, the first and third respondents have applied for orders that the application be dismissed because the material filed by the applicant in support of its case does not substantiate it. 10 In these circumstances the proceeding cannot be moved forward by the applicant. It is unable to successfully prosecute the proceeding and hence it is appropriate that the proceeding be dismissed. The applicant must pay the respondents' costs of the proceeding. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North. Associate: Dated: 28 February 2012