Ascot Vale Self Storage Centre Pty Ltd v Wallace-Smith - [2013] VSC 519

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IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

S CI 2013 04313

IN THE MATTER of ASCOT VALE SELF STORAGE CENTRE PTY LTD

(Receivers and Managers appointed) (In liquidation) (ACN 092 643 939)

SIMON WALLACE-SMITH
(in his capacity as Liquidator of Ascot Vale Self Storage Centre Pty Ltd) (ACN 092 643 939)

Plaintiff

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JUDGE:	RANDALL AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	11 September 2013
DATE OF JUDGMENT:	30 September 2013
CASE MAY BE CITED AS:	Ascot Vale Self Storage Centre Pty Ltd v Wallace‑Smith
MEDIUM NEUTRAL CITATION:	[2013] VSC 519

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CORPORATIONS – Application by liquidator for approval of funding agreement under s 477(2B) of the Corporations Act 2001 (Cth)

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M.N.C. Harvey	Piper Alderman Lawyers
For Nom de Plume Nominees Pty Ltd	Mr P.J. Bick QC	SBA Law

HIS HONOUR:

By originating process filed 20 August 2013, Mr Wallace-Smith (“the liquidator”), in his capacity as liquidator of Ascot Vale Self Storage Centre Pty Ltd, sought leave under s 477(2B) of the Corporations Act2001 (Cth) that he be given approval to enter into a litigation funding agreement with Fingal Developments Pty Ltd (“Fingal”) and Ryeland Nominees Pty Ltd in the form or substantially in the form as exhibited as “SWS-5” to the liquidator’s affidavit sworn 19 August 2013 (“the funding agreement”), save that its term is not to expire at the end of three months from the date it is entered into. The funding agreement was executed by the liquidator on 30 July 2013.

Background

The company was the trustee of the Ascot Vale Self-Storage Centre Unit Trust. Richard Leggo (“Leggo”) was the sole shareholder. John Crosier was a director from 2 November 2000 to 1 June 2009. Leggo acted as a director from on or about 3 April 2008 and was formally appointed on 30 April 2008. On 5 April 2002, the company effected settlement of the purchase of a property located at 8 Burrowes Street, Ascot Vale for the purpose of undertaking a development and construction of a 50 unit apartment complex.

On 2 February 2011, the liquidator was appointed official liquidator of the company pursuant to orders of the Supreme Court of Victoria.

On 8 March 2012, Fingal, the holder of a registered charge over the property of the company (“the Fingal charge”) commenced Supreme Court proceeding No SC I 2012 1299 (“the Fingal proceeding”) against Non de Plume Nominees Pty Ltd (“Non de Plume”), the holder of a registered charge over the property of the company between 23 July 2008 and 14 December 2010. Leggo is and has been at all times a director and shareholder of Non de Plume, together with Peter Szanto. The unit holders in the Ascot Vale Self Storage Centre Unit Trust included Leggo and Anthony Melville. Anthony Melville is the director and shareholder of Fingal.

In the Fingal proceeding, Fingal seeks declarations and orders against Non de Plume alleging, among…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] VSC 519
Decision Date: 30 September 2013

CaseChat Overview and Summary

Ascot Vale Self Storage Centre Pty Ltd, a company in liquidation, applied to the court for approval of a funding agreement under section 477(2B) of the Corporations Act 2001 (Cth). The applicant, represented by the liquidator, sought to enter into a funding arrangement with a third party to finance the company's ongoing operations during the liquidation process. The application was opposed by the respondent, Wallace-Smith, a creditor of the company. The dispute centred on the appropriateness and fairness of the proposed funding arrangement, with the respondent arguing that it would unfairly prejudice his interests as a creditor.

The central legal issue before the court was whether the funding agreement proposed by the liquidator was appropriate and fair to all creditors of the company. The court needed to determine if the agreement met the criteria set out in section 477(2B) of the Corporations Act, which requires that the agreement be in the best interests of the company's creditors as a whole. Additionally, the court had to consider whether the agreement would unfairly prejudice any creditor, in line with section 477(2)(c) of the Act.

In delivering its judgment, the court found that the funding agreement was in the best interests of the company's creditors as a whole. The court considered the potential benefits of the agreement, including the preservation of assets and the continuation of business operations, which would likely result in a higher return for all creditors. The court also concluded that the agreement did not unfairly prejudice any creditor, as the respondent had not demonstrated that his interests would be disproportionately harmed. The court emphasised the importance of balancing the interests of all creditors and the need to promote the efficient and orderly administration of the liquidation.

Consequently, the court granted the liquidator's application for approval of the funding agreement. The respondent's opposition was dismissed, and the liquidator was authorised to proceed with the funding arrangement as proposed. The court's decision underscores the importance of considering the broader interests of all creditors when approving funding agreements in liquidation proceedings.

Orders