FEDERAL COURT OF AUSTRALIA
5G Developments Pty Ltd (in liq) v Massie, in the matter of 5G Developments Pty Ltd (in liq) [2021] FCA 791
File number(s): NSD 1536 of 2019 Judgment of: STEWART J Date of judgment: 13 July 2021 Catchwords: CORPORATIONS – insolvency – application pursuant to ss 90-15 and 90-20 of Sch 2 to the Corporations Act 2001 (Cth) to set aside adjudication of proof of debt by a special purpose liquidator – application by a director of the corporation in liquidation – onus on the application – nature of review of the adjudication – de novo hearing – whether financial statements were impermissibly altered – timing of a payment that purportedly discharged a debt – whether joint ventures existed to develop properties
CONTRACTS – guarantee – whether guarantor was a principal debtor or guarantor pursuant to variations of the agreement
Legislation: Corporations Act 2001 (Cth) Sch 2, ss 90-15, 90-20
Evidence Act 1995 (Cth) s 64(3)
Federal Court (Corporations) Rules 2000 (Cth) rr 4.2, 14.1
Limitation Act 1969 (NSW) s 14
Cases cited: Friend v Brooker [2009] HCA 21; 239 CLR 129
Hooper v Lock (in liq) [2016] FCA 298
Israel v Foreshore Properties Pty Ltd (1980) 30 ALR 631
Marsland v Gamble [2002] WASC 213
Re Azmac Pty Ltd (in liq) [2020] NSWSC 204; 146 ACSR 113
Re Bluechip Development Corporation (Cairns) Pty Ltd (in liq) (recs and mgrs apptd) [2013] FCA 1281
Re DH International Pty Ltd (in liq) [2017] NSWSC 870; 121 ACSR 585
Re Galaxy Media Pty Ltd [2001] NSWSC 917; 39 ACSR 483
ReHayes (Liquidator) v 5G Developments Pty Ltd [2019] FCA 1541
Re Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818; 50 ASCR 565
Sands Contracting Pty Ltd v Cant [2021] FCA 638
Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245
Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; 169 CLR 332
Date of hearing: 29–30 October, 2 November 2020 Date of last submissions: 25 November 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of Paragraphs: 215 Counsel for the Applicants: First applicant appeared in person and with leave on behalf of the other applicants
(R Marshall SC and N Olson – written submissions)Solicitor for the Applicants: MistryFallahi Lawyers & Business Advisors (solicitors withdrew before the hearing) Counsel for the First Respondent: H Somerville Solicitor for the First Respondent: TurksLegal Counsel for the Second Respondent: C Harris SC and E Keynes Solicitor for the Second Respondent: Colin Biggers & Paisley ORDERS
NSD 1536 of 2019 BETWEEN: 5G DEVELOPMENTS PTY LTD (FORMERLY KNOWN AS DENHAM WYNDHAM PTY LTD) (IN LIQ) (and another named in the Schedule)
First Plaintiff
AND: HUGH HAMON ROBERT MASSIE (and others…
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- Case
- [2021] FCA 791
- Decision Date
CaseChat Overview and Summary
The court found that DC remained a guarantor of 5G Developments Pty Ltd's (DW) obligations after each variation of the facility agreement. The Third Deed of Variation established an independent obligation for DC to pay $100,000 per month to the lender, MBL, irrespective of any default by DW. The court concluded that the claim sought to be proved was a true liability of the company enforceable against it according to law. The payments made by DC to MBL were on account of DW's debt to MBL and were part of the debt owed by DW to DC. The court held that Mr Massie had not discharged the onus on him to show error in Mr Livingstone's conclusions.
The court dismissed the interlocutory application and directed the parties to file written submissions regarding costs. The liabilities of DW to DC, as outlined in Mr Livingstone's Notice, were found to be enforceable against DW, and the proof of debt was properly admitted. The court did not find any conflict or lack of independence affecting Mr Hayes or Mr Livingstone.
The final orders required the parties to file written submissions regarding any costs order they contend for, within specific timeframes, and to answer any such submissions from other parties within seven days thereafter. The entry of orders was governed by Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. The interlocutory process filed on 24 February 2020 be dismissed.
2. The parties file and serve written submissions of no more than three pages as follows:
(a) in support of any costs order they contend for, within 7 days of these orders; and
(b) in answer to any such submissions of any other party, within 7 days thereafter.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
This being said, and as noted, the fundamental question is whether the claim sought to be proved is a true liability of the company enforceable against it according to law. ConsiderationDC’s payments to MBL It was put by the applicants in their points of claim that pursuant to the Third Deed of Variation, DC was a principal debtor to MBL for the Tranche 1 Debt. Put another way, the applicants say that the payments made by DC to MBL were not on account of DW’s debt to MBL and therefore cannot be part of a debt owed by DW to DC. DC had been a guarantor under the 29 July 2005 “Investment Facility and Guarantee Agreement”. DC remained a guarantor of DW’s obligations after the first, second and third time the facility agreement was varied. The key difference under the Third Deed of Variation was that DC had an obligation to pay $100,000 per month to MBL that was independent of any default (after the Third Deed of Variation was concluded) by DW. It is first helpful to consider the evolution of the obligations under the MBL Facility. Under the initial agreement DC is listed as a guarantor. Clause 15 is headed “guarantee and indemnity” and sets out the obligations of the guarantor. Clause 15 relevantly states:15.1The Guarantor unconditionally and irrevocably guarantees payment to the Lender of the Obligations.15.2If the Customer does not pay the Obligations to the Lender on time and in accordance with this Agreement the Guarantor agrees to pay the Obligations to the Lender on demand from the Lender (whether or not demand has previous been made on the Customer). A demand may be made at any time and from time to time. The “Obligations” included all the obligations and liabilities of the “Customer” (DW) under the agreement. The first, second and third variations of the agreement did not disturb the terms of the guarantee. Clause 3 of the Third Deed of Variation divided the total amount owing under the Facility (i.e., the facility provided to DW and guaranteed by, among others, DC) of, at that time, $31,963,000 into the two tranches identified at [42] above. There is nothing in the Third Deed of Variation to remove the liability of DW to repay the facility, i.e., the two tranches. Clause 4.1 of the Third Deed of Variation states:In consideration of the Lender entering into this Deed:(a) [DC] agrees to pay the Lender the sum of $6,700,000.00 (plus interest upon the balance of that sum outstanding under clause 3(b)) by equal calendar monthly instalments of not less than $100,000.00 per calendar month with the first such payment being due on 28 February 2010 and subsequent payments to be made calendar monthly thereafter. Such payments will be applied in reduction of the Tranche 1 Facility for so long as any monies are outstanding under that Tranche;(b)Denham Constructions Property Group Pty Ltd undertakes to pay to the Lender all proceeds paid or payable to Denham Constructions Property Group Pty Limited (up to a total maximum amount of $6,200,000.00) from its interest in Denmac Property Group Pty Limited and any subsidiary of that company (including capital and income entitlements) (DPGL Interest) upon the earlier of receipt or becoming entitled to receive such proceeds. Such payments will be applied in reduction of the Tranche 2 Facility for so long as any moneys are outstanding under that Tranche.