Hall v Mercury Information Technology (South Australia) Pty Limited [2003] FCA 645

FEDERAL COURT OF AUSTRALIA

Hall v Mercury Information Technology (South Australia) Pty Limited [2003] FCA 645 GREGORY WINFIELD HALL in his capacity as Receiver & Manager of LAPTOP LAND (NSW) PTY LIMITED (RECEIVER & MANAGER APPOINTED) ACN 052 529 656 v MERCURY INFORMATION TECHNOLOGY (SOUTH AUSTRALIA) PTY LIMITED (Administrator Appointed) ACN 008 100 196 & ORS N 3008 OF 2002

STONE J 20 JUNE 2003 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 3008 OF 2002

BETWEEN: GREGORY WINFIELD HALL in his capacity as Receiver & Manager of LAPTOP LAND (NSW) PTY LIMITED (RECEIVER & MANAGER APPOINTED) (PROVISIONAL LIQUIDATOR APPOINTED) ACN 052 529 656

APPLICANT

AND: MERCURY INFORMATION TECHNOLOGY (SOUTH AUSTRALIA) PTY LIMITED (Administrator Appointed)

ACN 008 100 196

FIRST RESPONDENT

MERCURY INFORMATION TECHNOLOGY PTY LIMITED (In Liquidation) ACN 079 712 208

SECOND RESPONDENT

LAPTOP LAND (QLD) PTY LIMITED ACN 089 859 861

THIRD RESPONDENT

MERCURY INFORMATION TECHNOLOGY (VIC) PTY LIMITED ACN 095 700 897

FOURTH RESPONDENT

MERCURY SERVICE GROUP PTY LIMITED

ACN 089 248 706

FIFTH RESPONDENT

PERSONAL COMPUTER AUCTION PTY LIMITED

ACN 091 786 266

SIXTH RESPONDENT

LAPTOP LAND (VIC) PTY LIMITED ACN 090 489 740

SEVENTH RESPONDENT

LAPTOPS DIRECT.COM PTY LIMITED ACN 083 130 349

EIGHTH RESPONDENT

MERCURY GROUP PTY LIMITED ACN 082 594 081

NINTH RESPONDENT

LAPTOP LAND (SYDNEY) PTY LIMITED ACN 089 248 715

TENTH RESPONDENT

MERCURY GROUP ADMINISTRATION PTY LIMITED ACN 089 248 699

ELEVENTH RESPONDENT

MERCURY FINANCIAL SERVICES PTY LIMITED

ACN 097 037 039

TWELFTH RESPONDENT

GIGIDIN PTY LIMITED ACN 064 669 361

THIRTEENTH RESPONDENT

RENT-A-LITE PTY LIMITED ACN 000 542 058

FOURTEENTH RESPONDENT

IAN RUSSELL LOCK in his capacity as Administrator of MERCURY INFORMATION TECHNOLOGY (SOUTH AUSTRALIA) PTY LIMITED (Administrator Appointed)

ACN 008 100 196

FIFTEENTH RESPONDENT

RONALD J DEAN-WILLCOCKS in his capacity as Administrator of MERCURY INFORMATION TECHNOLOGY PTY LIMITED (Administrator Appointed) ACN 079 712 208

SIXTEENTH RESPONDENT

JUDGE: STONE J

DATE OF ORDER: 20 JUNE 2003

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application in the notice of motion filed on 9 May 2003, so far as it relates to a variation of the undertakings given in this proceeding on 15 April 2002 by Mr Derek Merdith, Mercury Group Pty Limited, Gigidin Pty Limited and Rent-a-lite Pty Limited be dismissed. 2. The applicant on the notice of motion bear the costs of the notice of motion relating to the claim to vary the undertakings referred to in Order 1. 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 N 3008 OF 2002

BETWEEN: GREGORY WINFIELD HALL in his capacity as Receiver & Manager of LAPTOP LAND (NSW) PTY LIMITED (RECEIVER & MANAGER APPOINTED) (PROVISIONAL LIQUIDATOR APPOINTED) ACN 052 529 656

APPLICANT

AND: MERCURY INFORMATION TECHNOLOGY (SOUTH AUSTRALIA) PTY LIMITED (Administrator Appointed)

ACN 008 100 196

FIRST RESPONDENT

MERCURY INFORMATION TECHNOLOGY PTY LIMITED (Administrator Appointed) ACN 079 712 208

SECOND RESPONDENT

LAPTOP LAND (QLD) PTY LIMITED ACN 089 859 861

THIRD RESPONDENT

MERCURY INFORMATION TECHNOLOGY (VIC) PTY LIMITED ACN 095 700 897

FOURTH RESPONDENT

MERCURY SERVICE GROUP PTY LIMITED

ACN 089 248 706

FIFTH RESPONDENT

PERSONAL COMPUTER AUCTION PTY LIMITED

ACN 091 786 266

SIXTH RESPONDENT

LAPTOP LAND (VIC) PTY LIMITED ACN 090 489 740

SEVENTH RESPONDENT

LAPTOPS DIRECT.COM PTY LIMITED ACN 083 130 349

EIGHTH RESPONDENT

MERCURY GROUP PTY LIMITED ACN 082 594 081

NINTH RESPONDENT

LAPTOP LAND (SYDNEY) PTY LIMITED ACN 089 248 715

TENTH RESPONDENT

MERCURY GROUP ADMINISTRATION PTY LIMITED ACN 089 248 699

ELEVENTH RESPONDENT

MERCURY FINANCIAL SERVICES PTY LIMITED

ACN 097 037 039

TWELFTH RESPONDENT

GIGIDIN PTY LIMITED ACN 064 669 361

THIRTEENTH RESPONDENT

RENT-A-LITE PTY LIMITED ACN 000 542 058

FOURTEENTH RESPONDENT

IAN RUSSELL LOCK in his capacity as Administrator of MERCURY INFORMATION TECHNOLOGY (SOUTH AUSTRALIA) PTY LIMITED (Administrator Appointed)

ACN 008 100 196

FIFTEENTH RESPONDENT

RONALD J DEAN-WILLCOCKS in his capacity as Administrator of MERCURY INFORMATION TECHNOLOGY PTY LIMITED (Administrator Appointed) ACN 079 712 208

SIXTEENTH RESPONDENT

JUDGE: STONE J

DATE: 25 JUNE 2003

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 15 April 2002 certain undertakings were given to this Court by Mr Derek Merdith and each of Mercury Group Pty Limited, Gigidin Pty Limited and Rent-a-lite Pty Limited respectively the ninth, thirteen and fourteenth respondents in this proceeding (together the 'Merdith companies'). In so far as is relevant the substance of those undertakings was that those giving the undertakings would not: 'transfer or agree to transfer, encumber or agree to encumber, or otherwise deal with any property or asset of any one or more of them, whether held by them for their own benefit or for the benefit of any other party, without the written consent of the applicant.' 2 Paragraph 2 of those undertakings stated: 'without limiting the generality of the forgoing, the undertaking referred to in the preceding paragraph includes an undertaking not to deal with the property described in the certificate of title, folio identifier 12/598868, being the land situated at and known as 24 Sturdee Lane, Lovett Bay in the State of New South Wales (the property) for the purposes of any refinancing whether by way of a grant or an equitable mortgage or otherwise reducing the ninth respondent's equity in the property, without the prior written consent of the applicant or order of the Court.' 3 The applicant referred to in the undertaking is Mr Gregory Winfield Hall in his capacity as Receiver and Manager of Laptop Land (NSW) Pty Limited (Receiver and Manager Appointed) ('Laptop Land'). By notice of motion filed on 9 May 2003 Mr Merdith seeks a variation of those undertakings on behalf of himself and the Merdith companies. 4 The circumstances behind the relief sought relate to proceedings brought in the Supreme Court of New South Wales in which the defendants are Mr Derek Merdith, his father, Mr Alexander Merdith, his mother, Mrs Solange Merdith, and the Merdith companies. The Supreme Court proceedings are brought by Laptop Land, Stephen James Parbery, in his capacity as provisional liquidator of Laptop Land (NSW) Pty Limited (Provisional Liquidator Appointed) (Receiver and Manager appointed), Mr Hall in the capacity mentioned in par [3] and Compaq Computer Australia Pty Limited. 5 It is neither necessary nor appropriate that I examine the details of the claims made in the statement of claim in the Supreme Court proceedings. It is sufficient to say that it involves a dispute between the plaintiffs and the defendants concerning the beneficial ownership of certain land. Broadly speaking the plaintiffs claim that Laptop Land is the beneficiary and the defendants claim that the beneficiaries are, what might broadly be called, the 'Merdith interests'. 6 It is clear that the Court has power to release a party from an undertaking even where there was no mistake operative at the time the undertaking was given; Adam P Browne Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR at 177-178. However, the onus of proof is on the party seeking a release or variation of such an undertaking to establish by evidence that new facts have been discovered or have come into existence that would render the continued enforcement of the undertaking unjust. 7 Mr Merdith has not sought to allege that there was any mistake operative at the time the undertakings in question were given. As mentioned above his application relates to access to funds required for legal expenses, specifically in relation to the Supreme Court proceeding. 8 Since the notice of motion was filed it would appear that there have been negotiations between Mr Merdith and Mr Hall directed to a compromise whereby at least some funds might be made available to Mr Merdith. Mr Parbery however, opposes any such compromise and any relief of the nature sought by Mr Merdith unless and until Mr Merdith has demonstrated that he has no funds from which these expenses might otherwise be met. 9 The notice of motion came before me for directions on 16 May 2003. At that time I made a number of orders including that Mr Merdith file and serve draft orders setting out the precise variation of the undertakings which he was seeking and that he file and serve affidavit evidence in relation to the anticipated legal expenses and 'the means available to him and the Merdith interests' to meet those costs. The notice of motion, only in so far as it related to the claim to vary the undertakings, was set down for hearing on 27 May. Conscious that Mr Merdith was unrepresented, I took particular care to ensure that he understood the orders being made by the Court and gave him ample opportunity to indicate if he did not understand what was required of him. 10 On 27 May it transpired that Mr Merdith had not observed the timetable set by the Court. He sought to file in Court an affidavit that had not been provided to counsel for Mr Hall or Mr Parbery. In the circumstances it was necessary to adjourn the hearing. In doing so I again emphasised to Mr Merdith the importance of complying with the Court's orders and specifically advised him that the matter would be heard on 20 June 2003 irrespective of whether he had provided adequate evidence. 11 At the hearing the only evidence put forward by Mr Merdith was two affidavits sworn on 7 and 27 May respectively. Neither of those affidavits present any evidence as to his personal circumstances or the funds available to the Merdith interests. In other words, there was no compliance with the orders referred to in pars [9]-[10] above. 12 Mr Dowdy, counsel for Mr Parbery strenuously opposed Mr Merdith's application. He submitted that an applicant seeking relief of the kind sought here has the burden of proof to show that he has no other assets from which to pay legal fees and, that burden not having been discharged, this application must be dismissed. 13 Mr Merdith had no response to this other than to say that his assets were bound by the undertaking anyway. There is of course some truth in this observation, however Mr Merdith has not sought a variation of the undertaking in relation to his own assets nor has he provided any evidence as to his income. He has also not provided any evidence as to assets that are available to the Merdith companies. Mr Dowdy relies on the decision of Phillips J in Commissioner of Taxation v Manners and Terrule Pty Ltd (1985) 81 FLR 131 and the decision of Young J in Corporate Affairs Commissioner v Transphere Pty Ltd (unreported) Supreme Court of New South Wales, 11 September 1987, 2917 of 1984 in which his Honour stated that in cases of this sort: 'There is a burden of proof on the applicant to show that he has no other assets from which he can pay legal fees. That burden has to be established on the civil standard of proof, but if the applicant does not come up to that standard of proof then the application must be dismissed.' 14 I do not myself see this rule as anything other than an application of the general principle that the applicant has the burden of proof to show that a continuation of the undertaking would be unjust. In failing to produce any relevant evidence Mr Merdith has not come anywhere near establishing such injustice. 15 Although counsel for Mr Hall indicated that his client was prepared to make some compromise (which was discussed at length) and that he was not instructed to press the point made by Mr Dowdy, counsel for Mr Hall did not oppose that view. 16 In the circumstances Mr Dowdy's point is well made and in my view the Court must dismiss Mr Merdith's application for a variation of the undertaking given on 15 April 2002. 17 At the hearing considerable time was spent on evidence and argument directed as to whether the Merdith interests (in which I include those of Mr and Mrs Merdith senior) could be presumed to have resources sufficient for them to meet the expense of defending the Supreme Court proceedings. Given the view I have already expressed it is not necessary for me to express an opinion on this issue.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate: Dated: 25 June 2003

Counsel for the Applicant: Mr T Castle

Solicitor for the Applicant: Henry Davis York

Counsel for the Respondent: Mr P Dowdy

Solicitor for the Respondent: Clayton Utz

Mr D Merdith: Mr Merdith appeared in person.

Date of Hearing: 20 June 2003

Date of Judgment: 20 June 2003