Australian Securities and Investments Commission v Oakleigh Acquisitions Pty Ltd

[2003] WASC 230

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION -v- OAKLEIGH ACQUISITIONS PTY LTD [2003] WASC 230

CORAM:   PULLIN J

HEARD:   28 OCTOBER 2003

DELIVERED          :   28 OCTOBER 2003

FILE NO/S:   COR 189 of 1999

MATTER                :Section 461 of the Corporations Law of Western Australia

and

OAKLEIGH ACQUISITIONS PTY LTD
(ACN 008 870 454)

BETWEEN:   AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

AND

OAKLEIGH ACQUISITIONS PTY LTD (ACN 008 870 454)
Respondent

Catchwords:

Corporations - Winding up - Liquidator's application for approval of compromise - Words and phrases - "Debt"

Legislation:

Corporations Act 2002, s 477(2A)

Result:

Compromise approved

Category:    B

Representation:

Counsel:

Applicant:     No appearance

Respondent:     Mr M J Hawkins

Solicitors:

Applicant:     No appearance

Respondent:     Jackson McDonald

Case(s) referred to in judgment(s):

Conlan v Registrar of Titles (2001) 24 WAR 299

Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83

Re Tietyens Investments Pty Ltd (1999) 31 ACSR 1

Case(s) also cited:

Nil

1. PULLIN J:  This is an application pursuant to s  477(2A) of the Corporations Act, seeking approval of the Court in relation to the compromise of a debt to the company, which approval is necessary if the amount claimed by the company is more than $20,000.

2. The compromise must be in relation to a debt, and there is authority indicating that the word "debt" has what I might call its ordinary meaning:  a debt is a chose in action founding an action for debt.  The characteristic of a debt is that it is a sum of money which is immediately payable or which by reason of a present obligation will become payable in the future - see Re Tietyens Investments Pty Ltd (1999) 31 ACSR 1.

3. The position is here that a debt, was due by Hardie Developments Pty Ltd ("Hardie") pursuant to the terms of a mortgage which it had executed, and the debt was due to Oakleigh Acquisitions Pty Ltd.  The debt was paid into an account pending claims by Hardie that it was not obliged to pay the full amount which it had paid into the account.  The full amount which it had paid was $1,218,000, and Hardie claimed that it was, in fact, only obliged to pay $1,057,908.11.  This situation arose because the mortgage in question which had been signed by Hardie contained a provision that Hardie would pay on demand the principal sum, which was defined as $1,218,000, but Hardie claimed that it had actually only been advanced the smaller sum which I have already mentioned.

4. When there was a trial of certain preliminary issues, reported in Conlan v Registrar of Titles (2001) 24 WAR 299, Hardie claimed it was entitled to rectification of the mortgage so that it reflected an obligation to repay the figure of $1,057,908.11 rather than the figure which appeared in the mortgage document.

5. His Honour concluded that so far as the obligation of Hardie was concerned, apart from issues of rectification, it was clear because the language of the mortgage was clear and unambiguous, and in Conlan's case at [298]‑[299] his Honour said:

   "In my view the language that the parties have chosen to employ is clear and unambiguous.  For the purposes of the mortgage document the Principal Sum is $1,218,000 even though some lesser amount was actually advanced.  That is the proper construction of the mortgage document

   Counsel for [Hardie] submitted that if the construction issue were to be found against [Hardie] the mortgage ought to be rectified so as to reflect the true terms of the arrangement. …"

6. At [304] his Honour said:

   " … if [Hardie] is to achieve a discharge of the mortgage by paying a sum less than $1,218,000 it will first be necessary to have the mortgage rectified.  Putting it bluntly, I would not take much persuading that as between [Hardie] and Oakleigh, the mortgage ought to be rectified.  The position as between [Hardie] and those to whom a registered interest in the mortgage was transferred, presents greater difficulties."

7. At [305], he said:

   "However, I cannot decide whether it is entitled to a decree for rectification on the available evidence. …"

8. At [319] and [320], his Honour said:

   "… If the parties wish to take this matter further, it should be done in a properly constituted suit for rectification.  In any such suit the issue whether the investors were volunteers and, if so, whether that affects the position, should be regarded as open and not as having been finally dealt with in these reasons.

   I should add that to the extent that Oakleigh still holds an interest in the mortgage, the potential claim by [Hardie] against it for rectification is not beset by these problems, or at least some of them.  However, it still falls to be decided on a full appreciation of the evidence.  It may be possible for the relevant parties to reach an extra‑curial solution."

9. An opinion has been obtained from counsel appearing for the liquidator, and that opinion advises the liquidator about the prospects of claims which might be made by Hardie, as a result of which the liquidator now wishes to settle.  The liquidator has entered into a deed of settlement dated 26 August 2003 which does settle the matter, whereby the liquidator shall cause the settlement sum, which is defined as $206,190.30 plus interest accrued on that amount, to be paid from the account in which it is held, to Hardie.  This settlement is subject to a condition precedent, namely, that the Court approves the compromise or determines that the section does not apply to the settlement.

10. In my view, the section does apply for the reasons that I have already mentioned, namely, it relates to a debt which is claimed by Oakleigh from Hardie, and the compromise is in relation to how much of that money has to be paid across.

11. In the case that I have already mentioned, Re Tietyens, Weinberg J referred to a decision of Giles J in Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83, in which Giles J said, referring to a section of equivalent effect in earlier Corporations legislation:

    "The court pays regard to the commercial judgment of the liquidator.  That is not to say that it rubber stamps whatever is put forward by the liquidator but, as is made clear in Re Mineral Securities (Australia) Ltd [1973] 2 NSWLR 207; at 231-2, the court is necessarily confined in attempting to second guess a liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct."

12. In my view, there is nothing which indicates any lack of good faith, error in law or principle, or any real or substantial grounds for doubting the prudence of the liquidator's conduct in wishing to settle this matter, and as a result I will make an order giving approval under s 477(2A) of the Corporations Act.