Allied Rural Pty Ltd v Stimpson

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SUPREME COURT OF QUEENSLAND

CITATION:

Allied Rural Pty Ltd v Stimpson [2023] QCA 77

PARTIES:

ALLIED RURAL PTY LTD
(SUBJECT TO DEED OF COMPANY ARRANGEMENT)
ACN 141 306 229
(appellant)
v
DAVID MICHAEL STIMPSON IN HIS CAPACITY AS VOLUNTARY ADMINISTRATOR OF ALLIED RURAL PTY LTD
(SUBJECT TO DEED OF COMPANY ARRANGEMENT)
ACN 141 306 229
(respondent)

FILE NO/S:

Appeal No 6524 of 2022
SC No 3521 of 2021

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:


Supreme Court at Brisbane – [2022] QSC 74 (Jackson J)

DELIVERED ON:

24 April 2023

DELIVERED AT:

Brisbane

HEARING DATE:

28 September 2022

JUDGES:

Mullins P and Morrison JA and Kelly J

ORDERS:

1.   Appeal dismissed.

2.   The appellant pay the respondent’s costs of and incidental to the appeal.

CATCHWORDS:

CORPORATIONS – VOLUNTARY ADMINISTRATION – ADMINISTRATOR – REMUNERATION – where the respondent was appointed as the administrator of the appellant company under Part 5.3A of the Corporations Act 2001 (Cth) – where a deed of company arrangement was proposed and accepted by the creditors of the appellant company – where the creditors of the appellant company resolved to determine the respondent administrator’s remuneration on the basis that it was set at 20 per cent of the value of the admitted proofs of creditors entitled to share in the fund provided for under the deed of company arrangement – where, at first instance, the respondent administrator applied to have the creditors’ remuneration determination reviewed and set aside and to substitute another remuneration determination in the amount of $228,891 plus GST or, in the alternative, to vary the remuneration determination to the amount of $228,891 plus GST – where the application was opposed by the appellant company and two creditors – where the trial judge rejected all of the grounds of objection and varied the remuneration to $228,891 plus GST – where the trial judge found that the appellant company was precluded from raising the question of invalidity of the respondent administrator’s appointment by the doctrine of approbate and reprobate – whether the trial judge erred in finding that the appellant was precluded from opposing the application at first instance by reason of the doctrine of approbate and reprobate – whether the trial judge erred in varying the remuneration as determined by the creditors’ resolution

CORPORATIONS – VOLUNTARY ADMINISTRATION – ADMINISTRATOR – APPOINTMENT – BY COMPANY – where, for a period between 2 March 2021 and 10 May 2021, the appellant company was in voluntary administration – where the respondent was appointed as the administrator of the appellant company under Part 5.3A of the Corporations Act 2001 (Cth) by the sole director at that time – where the appointing director was the trustee of the majority shareholder in the appellant company – where the respondent administrator had knowledge of a dispute between the appointing director and a beneficiary of the majority shareholder of the appellant company – whether the respondent administrator had been appointed for an improper purpose and not because of a genuine…

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Details
Case
[2023] QCA 77
Decision Date

CaseChat Overview and Summary

In the case of Allied Rural Pty Ltd v Stimpson, the Full Court of the Federal Court of Australia considered an appeal brought by the appellant, Allied Rural Pty Ltd, against the decision of the trial judge to vary the remuneration of the respondent, an administrator appointed under Part 5.3A of the Corporations Act 2001 (Cth). The primary issue was whether the trial judge erred in finding that the appellant was precluded from opposing the application at first instance by reason of the doctrine of approbate and reprobate, and whether the trial judge erred in varying the remuneration as determined by the creditors’ resolution. The Court held that the appeal should be dismissed, with costs.

The court examined the doctrine of approbate and reprobate and its relationship with equitable election, as discussed in Mandurah Enterprises Pty Ltd v Western Australian Planning Commission. The court found that the doctrine of approbate and reprobate was not applicable in this case as the appellant could not terminate or create statutory sourced powers or rights. The court held that the creditors did not have the power to terminate the administration at the first creditors’ meeting, and the resolution was not effective in law to terminate the administration.

The court also examined the issue of whether the respondent administrator had been appointed for an improper purpose. The court found that the administrator could have been satisfied that the appointing director had a bona fide belief that the company was, or was likely to become, insolvent, and that the appointment was made because of a genuine belief that there was a risk the appellant company would become insolvent.

The court concluded that the trial judge's decision to vary the remuneration was not in error, and that the doctrine of approbate and reprobate did not apply to preclude the appellant from opposing the application at first instance. The appeal was dismissed with costs.

The final orders of the Court were:
1. Appeal dismissed.
2. The appellant pay the respondent’s costs of and incidental to the appeal.

Orders

Orders of the court

1. Appeal dismissed.

2. The appellant pay the respondent’s costs of and incidental to the appeal.

Background

Background to the litigation

In Mandurah Enterprises Pty Ltd v Western Australian Planning Commission,[18] the Western Australian Court of Appeal considered the doctrine of approbate and reprobate and its relationship to equitable election and election at common law:[19]“[105] It is convenient to commence with the doctrine of election. I am assisted by the discussion on the topic in Handley KR, Estoppel by Conduct and Election (2006) who distinguishes between four categories of election. The first is election between alternative and inconsistent rights such as where an innocent contracting party elects to terminate a voidable contract for breach or fraud. The choice is not between two sets of rights which co‑exist but a choice between an existing set of rights and a new set which does not yet exist. The election terminates one set of rights and creates another. Such an election is irrevocable. This type of election is not applicable in this case. The appellants by their conduct cannot terminate or create statutory sourced powers or rights.[106]The second is election between estates, otherwise known as equitable election. This doctrine applies where a person receives a gift under a will or other instrument. The third is election between inconsistent remedies. That applies where the law provides inconsistent remedies for one cause of action or claim. In these circumstances, there is no binding election before final judgment is entered. The final category is election in procedure which involves choices made during proceedings before final judgment or award. Such elections are not binding in the absence of an estoppel. The first, third and fourth categories are common law elections.[107]The conditions for and consequences of the individual categories of election differ. For example, the election becomes irrevocable at different points. Further, the authorities suggest that knowledge may not be relevant if judgment has been entered. However, in relation to election between inconsistent rights there must be an unequivocal act with knowledge of the material facts: Sargent v ASL Development Ltd (1974) 131 CLR 634 at 642; Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290. Subject to one qualification, the law is unclear as to whether there must also be knowledge as to the existence of a right to elect. The qualification is that knowledge of the right to elect is not required where the election is between contractually conferred rights or property rights (Sargent (at 645, 658); Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 634). Moreover, the balance of authority suggests that where a party acts unequivocally in a way that is only consistent with an election one way, it is not necessary to establish that the party was aware of their right to elect: Sargent (at 656 – 658); Ellison v Lutre Pty Ltd (1999) 88 FCR 116; Wiltrading (at 304 – 305).[108]The doctrine of approbation and reprobation was initially part of Scottish law. Its English equivalent was the doctrine of equitable election between estates: Lissenden v CAV Bosch Ltd [1940] AC 412; Douglas‑Menzies v Umphelby [1908] AC 224; Elder's Trustee and Executor Co Ltd v Commonwealth Homes and Investment Co Ltd (1941) 65 CLR 603, at 617 – 618. The notion of approbation and reprobation is used interchangeably in the case law with election, waiver and estoppel. As a result, it is difficult to confidently identify from the cases the material elements of any independent doctrine of approbation and reprobation.”[18](2008) 38 WAR 276.[19]Mandurah Enterprises Pty Ltd v Western Australian Planning Commission (2008) 38 WAR 276 at [105]–[108]. Emphasis added.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

This ground fails.Conclusion As all grounds have failed, the appeal ought to be dismissed with costs. I propose the following orders:1.Appeal dismissed.2.The appellant pay the respondent’s costs of and incidental to the appeal. KELLY J: I agree with the reasons of Morrison JA and the orders proposed.

Ratio Decidendi

Legal Principle Established

The resolution was not effective in law to terminate the administration. The creditors did not have the power to terminate the administration at the first creditors’ meeting. Mr Doolan was aware of that because the Administrator’s solicitor said so at the meeting. It was another strategy intended to apply pressure to the Administrator to exercise the power, under s 442A of the Corporations Act, to remove Mr Blennerhassett as director of Allied so as to achieve one of the ultimate purposes of Mr Doolan’s ongoing litigation against Mr Blennerhassett.Application to terminate administration On 26 March 2021, the Administrator filed an application to terminate the administration under s 447A of the Corporations Act, returnable on 1 April 2021. The application was supported by an affidavit of the Administrator referring to his conditional opinion that Allied was solvent; that condition being that the alleged debts to Bosag and Mr Doolan were non-current. He also opined that the ongoing dispute between Mr Doolan and Mr Blennerhassett, and its impact, risked the trading activities of Allied, and would ultimately result in the insolvency of Allied. On 29 March 2021, Harfin, the member of Allied controlled by Mr Blennerhassett, filed an application for Allied to be wound up on the just and equitable ground. The application was supported by an affidavit of Mr Blennerhassett, setting out his version of the dispute between himself and Mr Doolan, and the breakdown of relations between himself and the employees and consultants of Allied. He deposed further as to his bases for forming the belief as to the insolvency of Allied. He expressed concerns as to the future activities of Mr Doolan and key employees, if the administration ended, and sought an order that Allied be wound up on the just and equitable ground. On 29 March 2021, Mr Doolan had a change of heart as to whether the administration should be terminated. On that day, Mr Doolan’s lawyer suggested to the Administrator that the Administrator and Allied should enter into a deed of company arrangement, as proposed by Mr Doolan, instead of the Administrator proceeding with his application to terminate the administration. That course would have removed the basis of Harfin’s application to wind up the company on the just and equitable ground. On 30 March 2021, Mr Doolan’s lawyer wrote to the Administrator referring to his email sent late the day before, making these points:(a)he urged acceptance of the proposal for a deed of company arrangement as viable because it was not greatly dissimilar to one raised by the Administrator’s employee on 8 March 2021 (that had been rejected at that time by Mr Doolan), and the committee of inspection supported it; (b)he contended that “[a]ll previous plans regarding termination of the administration are superseded” by the presentation of the proposal; and(c)he referred to the application to wind up that had been filed by Harfin and contended that application must be adjourned unless it was in the interests of creditors to proceed.