Australian Liquor, Hospitality & Miscellaneous Workers' Union v Terranora Lakes Country Club Pty Ltd

[1996] FCA 250

IN THE FEDERAL COURT OF AUSTRALIA                 ) 
  )  
NEW SOUTH WALES DISTRICT REGISTRY                )  No NG 84 of 1996
  )  
GENERAL DIVISION  )     

BETWEEN:  AUSTRALIAN LIQUOR, HOSPITALITY AND MISCELLANEOUS WORKERS' UNION  

Applicant

AND:  TERRANORA LAKES COUNTRY CLUB PTY LIMITED

Respondent

Coram:        Davies J.
Date:          30 January 1996
Place:         Sydney

MINUTES OF ORDER

THE COURT ORDERS THAT:

The motion be dismissed with costs.

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                )  No NG 84 of 1996
  )  
GENERAL DIVISION  )     

BETWEEN:  AUSTRALIAN LIQUOR, HOSPITALITY AND MISCELLANEOUS WORKERS' UNION  

Applicant

AND:  TERRANORA LAKES COUNTRY CLUB PTY LIMITED

Respondent

Coram:        Davies J.
Date:          30 January 1996
Place:         Sydney

REASONS FOR JUDGMENT

This application seeks the leave of the Court for proceedings to be commenced in the Industrial Relations Court of New South Wales in relation to the termination of the employment of a large number of employees of a company which is now under administration. 

Leave is sought under s.440D(1) of the Corporations Law. Terranora Lakes Country Club Pty Ltd ("the Company") was placed in administration on 21 December 1995. On 21 January 1996, at the second meeting of creditors, the creditors resolved that the administrator should have a further sixty days in which to bring in a final recommendation as to whether a scheme of arrangement should be adopted or the Company should be placed in liquidation.

An administration should, of course, be conducted promptly and the Corporations Law provides strict time limits for the calling of the first and the second meetings of creditors. Provision is made for extension of time by the Court under s.439A(6) and for the granting of an extension by the creditors under s.439B(2); but the intention is that, within a short period, the administrator should deal with the affairs of the corporation and should bring in a recommendation, either for a scheme of arrangement or for a liquidation, and that, within the time allowed, the creditors should vote and should resolve either that there be a scheme, that the company be put into liquidation or that the administration should come to an end. In that period the administrator is given great powers to deal with the affairs of the corporation, to carry on its business, even to sell the business or parts of the business, as the administrator sees fit.

Section 443A of the Corporations Law provides that the administrator of a company under administration is liable for the debts he or she incurs in the performance or exercise of powers and functions as administrator for services rendered, goods bought, property hired, leased or occupied. So, during the period of administration, the administrator comes under a personal liability for the debts incurred, although the administrator is given, under s.443D, a right of indemnity. Ordinarily, when a corporation is put into administration, it is in the position of being unable to pay its debts as they fall due and is often in the position of trading at a loss. I do not have before me particular details of the Company's position but that is the general situation.
         Ordinarily, because there is personal liability on the part of the administrator, urgent steps are taken to reduce the outgoings.  If an administrator is able to reduce outgoings and to increase income to such an extent that the administrator sees a future for the company, then the administrator will make a recommendation for a scheme of arrangement.  If, however, the administrator considers that a scheme will be unsuccessful in restoring the company to profitability, then the administrator usually recommends that there be a winding up.

Because, in the course of the administration, before the administrator has formed a final view about these matters and the creditors have voted, the administrator is personally liable, it is an urgent matter for an administrator, who is seeking to restore the company to profitability, to take steps to reduce liabilities.

In the present case, notices terminating the employment of some 31 part-time and full-time employees have been given and certain casual employees have been informed that they are not required for casual employment.  The outgoings in relation to 31 employees would be substantial.  What is sought now is that leave be given so that an injunction can be sought which would restrain the administrator from terminating the employment of these employees.

It seems to me that such a step would not accord with the pattern which is laid down in the Corporations Law and that any proceedings to consider the issue of an injunction might interrupt the proper course of the administration and the restoration of the Company to profitability. Moreover, the existence of the personal liability of the
administrator weighs with me.  I assume that the steps complained of have been taken because the outgoings are too great, because the Company is not trading at a profit, indeed trading at a loss, and because steps should be taken to bring the Company back into a profitable position if that can be done.

It seems to me that the intent of the Corporations Law would be frustrated if leave were given for the institution of proceedings under s.194 of the Industrial Relations Act 1988 (Cth). I am of the view that the application should be refused because of the effect it would have on the administration and because of its conflict, in my view, with the intent of the Corporations Law.

I should also say that I am inclined to think that Mr Crow's submission that the terminations would not amount to relevant industrial action for the purposes of s.194 of the Industrial Relations Act is correct; but I need not form any final view on that point.

It may be that there is an outstanding question as to whether or not the terminations were in breach of the award.  If all that was sought was the institution of proceedings in the Industrial Relations Court of New South Wales to resolve that issue, which is obviously a proper issue for the Industrial Relations Court, then consideration could be given to the grant of leave.  That is obviously not an issue which can be resolved by the administrator or by a liquidator.  If there is doubt about it, then it is an issue which, it seems to me, would be proper to go the Industrial Relations Court to be ruled upon by that Court.  It is a different thing, however, to seek an order which, if granted, would, in effect, impose a personal liability upon the administrator arising from the
continuance of the employment of employees whom he has determined should be dismissed. 

For those reasons I think the motion must be dismissed with costs.

I certify that this and the 4 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.

Associate:

Date:  30 January 1996

Counsel for the applicant:  A.G. Rogers

Solicitors for the applicant:  Walsh James

Counsel for the respondent:  R.F. Crow

Solicitors for the respondent:  Phillips Fox

Date of hearing:  30 January 1996

Date of judgment:  30 January 1996