Case: Magarditch v Australian &amp; New Zealand Bank Group Limited (1999) 32 ACSR 367
Outcome: followed
Commissioner applied to the Court for leave to commence proceedings in the company's name, as part of proceedings he wishes to bring in his own name. Mr Beames applied under r 2.13(1) of the Federal Court (Corporations) Rules 2000 for, and I granted him, leave to appear to oppose the relief sought by the Commissioner. This application raises the following issues: (1) Whether this Court has jurisdiction to make an order that a person other than the liquidator be authorised to bring proceedings in the name of a company in liquidation under s 511 of the Act or has an inherent or implied power to make orders ancillary to the conduct of a winding up. (2) Whether the Commissioner has established that it is appropriate for the Court to grant the relief so as to displace the liquidator in discharge of his functions. (3) Whether the Commissioner has established that the action proposed to be taken by him in the company's name has some arguable foundation: Magarditch v Australian &amp; New Zealand Bank Group Limited (1999) 32 ACSR 367 at 384 [70]-[71] per Spender, French and Kenny JJ. The Commissioner relied in support of his application on evidence given by his solicitor, Russell Bayliss. I was taken to only a few of over 850 pages of the transcripts of the public examinations in the course of the hearing. The following account of facts is based on Mr Bayliss' assertions in his affidavit so as to provide the background in which the application can be considered and the passages in the transcripts to which I was taken. There was no cross-examination or other evidence. Thus, any findings or opinions on the evidence that I express in these reasons should not be understood as final conclusions arrived at after a contested trial. Rather, I have assumed the material on which the Commissioner relied could be proved in a trial in order to assess whether it established that the claims have some arguable foundation: Magarditch 32 ACSR at 384 [70]-[71]. Between about 1992 and 1 September 2003 PAAN conducted a security business, called Star Security. Mr Georgiou became a director of PAAN in 1995 and has remained in office since according to a company extract of the Australian Securities and Investments Commission in evidence. Mr Bayliss said that Mrs Georgiou was a director and company secretary from around 1996 until 2000. When she ceased to hold office, Mr Georgiou also assumed the role of company secretary. Each of Mr and Mrs Georgiou held 10 of the 20 issued ordinary shares in PAAN. In either 1995 or 1998, PAAN established a trading trust of which it was trustee. Mr and Mrs Georgiou were beneficiaries of the trust. Mr Bayliss said that PAAN, as trustee, purported to grant a licence to itself in its own right, to operate the security business. Thus, it appeared that PAAN, as trustee, held the assets of the security business on trust, and obtained a licence, from itself, to operate the business for its own benefit in consideration of the payment of the consideration due under the licence. Mr Bayliss said that this arrangement had led Mr and Mrs Georgiou to be confused about how to implement the differing rights of PAAN as operator of the business in its own right and trustee. He said that this confusion was evident from the public examination of Mr Georgiou. In Magarditch 32 ACSR at 377 [43], 384 [70]-[72] Spender, French and Kenny JJ applied the above authorities and principles. They held that the Court had a responsibility to see that any action taken in the company's name under the Court's authority was not vexatious or merely oppressive, even where there would be no drain on the assets of the company. The Court had to consider whether the action proposed to be taken in the company's name had some arguable foundation; see also Christianos v Aloridge Pty Limited (1995) 59 FCR 273 at 281B-282B, 284A-B per Beaumont, Whitlam and Tamberlin JJ.