Proceeding alleges breaches of statutory, equitable, fiduciary duties
Australia’s Federal Court has ordered the transfer of a proceeding to the Supreme Court of Western Australia under s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), noting that the parties requested the transfer by consent.
In Ashton v Pope (No 2), [2025] FCA 1121, the two respondents were company directors. A 2019 deed of settlement and release assigned to the applicant the company’s or its liquidators’ claims against the respondents and empowered him to initiate a proceeding challenging their conduct.
Before the WA Supreme Court, the company’s ultimate parent brought consolidated proceedings regarding the company’s insolvency.
Before the Federal Court, the applicant commenced an application alleging that the respondents made the company pay its parent, instead of paying its outstanding creditors, and contributed to the company’s financial collapse and ultimate insolvency.
The applicant said the respondents thus breached their statutory and equitable duties to the company under ss 180, 181,182, and 183 of the Corporations Act 2001 (Cth); their cognate fiduciary duties; and the terms of an August 2016 general security agreement between the company and one of its creditors.
The applicant alternatively asserted that the respondents prevented the receiver from repaying their debts to that creditor and other creditors.
In November 2022, Justice Banks-Smith of the Federal Court issued service orders arranging the service of the underlying application and associated documents on the first respondent in the US. The judge determined that:
The present matter involved a transfer application pertaining to the Federal Court case. The parties asserted a need to resolve the following common questions in the proceedings before the Federal Court and the WA Supreme Court:
The Federal Court of Australia deemed it in the interests of justice to transfer the proceeding to the WA Supreme Court upon considering that the parties had known about the possibility of a transfer since at least the time of the service orders.
First, the Federal Court found a potential risk for inconsistent findings, given the common issues for determination.
Second, the Federal Court ruled that a transfer would not lead to delay, prejudice the parties, or unduly intertwine them in broader litigation. The court noted the minor difference in the status of both matters.
Third, the Federal Court saw a potential benefit in costs and efficiency. The court held that a transfer would permit the parties to pursue a consolidation of the actions or proper directions to facilitate concurrent hearings and rely on mutual discovery and evidentiary exchange.
