Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton [2011] NSWCA 414 Hearing dates: 23 May 2011 Decision date: 20 December 2011 Before: McColl JA at [1]
Campbell JA at [2]
Young JA at [216]Decision: (1) Extend to 25 May 2011 the time in which to seek leave to cross-appeal.
(2) Grant leave to appeal.
(3) Grant leave to cross-appeal.
(4) Dismiss the cross-appeal.
(5) Allow the appeal.
(6) Set aside the orders in the court below, and in lieu thereof order that the summons be dismissed with costs.
(7) Respondent to pay costs of the Appellants of the application for leave to appeal, application for leave to cross-appeal, the appeal, and the cross-appeal.
(8) Respondent to have a certificate under the Suitors Fund Act in relation to the costs in order (7) if qualified.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: CORPORATIONS - voluntary administration - whether person having unadjudicated claim under s 106 Industrial Relations Act 1996 is a "creditor" bound by a Deed of Company Arrangement - whether Court has power under s 447A(1) Corporations Act 2001 (Cth) to vary operation of Pt 5.3A to allow admission of such claim
CORPORATIONS - voluntary administration - definition of "creditor" in Pt 5.3A - whether term has same meaning as defined in s 553 - Brash Holdings v Katile Pty Ltd [1996] 1 VR 24 - whether scheme, purpose and scope of Pt 5.3A require class of claims broader than that of claims under s 553
CORPORATIONS - voluntary administration - definition of "claim" in Pt 5.3A - contingent claim - Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 - requirement of existing obligation
INDUSTRIAL LAW - unfair contracts - status of unadjudicated claim under s 106 Industrial Relations Act - whether "claim" within meaning of s 553 - Majik Markets Pty Ltd v Brake & Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 - Fisher v Madden [2002] NSWCA 28 - Colley v Futurebrand FHA Pty Ltd [2005] NSWCA 223 - whether basis, founded on existing legal right, for asserting a right to participate in the division of the assets of the company - whether legally enforceable right to have Industrial Relations Commission determine application according to law is sufficient - analogy with claim for costs
CORPORATIONS - voluntary administration - power of Court - s 447A - whether Court has power under s 447A(1) Corporations Act 2001 (Cth) to vary operation of Pt 5.3A to deem to be a creditor someone who is…
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- AGLC
- BE Australia WD Pty Ltd (subject to a deed of company arrangement) v Sutton [2011] NSWCA 414
- Case
- [2011] NSWCA 414
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the Court of Appeal were: (1) whether a person with an unadjudicated claim under section 106 of the *Industrial Relations Act 1996* (NSW) is a "creditor" for the purposes of Part 5.3A of the *Corporations Act 2001* (Cth); (2) whether the definition of "claim" in Part 5.3A, particularly in light of case law such as *Community Development Pty Ltd v Engwirda Construction Co* (1969) 120 CLR 455, requires an existing obligation; and (3) whether the Court possesses the power under section 447A(1) of the *Corporations Act* to vary the operation of Part 5.3A to deem someone a creditor who is not otherwise recognised as such, considering the purpose and scope of the legislation.
The Court of Appeal reasoned that the definition of "creditor" in Part 5.3A of the *Corporations Act* is not necessarily confined to the meaning of "creditor" in section 553 of the *Corporations Act*, but rather must be understood in the context of the scheme, purpose, and scope of Part 5.3A. It considered that a "claim" within the meaning of Part 5.3A requires an existing obligation, even if the precise amount is unliquidated or contingent. The Court found that Ms Sutton's claim under section 106 of the *Industrial Relations Act 1996* (NSW) was not a claim founded on an existing obligation, but rather a right to seek a determination from the Industrial Relations Commission. The Court further held that while section 447A confers a broad power on the Court, it must be exercised judicially and for the purposes for which it was conferred, which include the proper operation of Part 5.3A. The Court concluded that it did not have the power under section 447A to deem Ms Sutton a creditor when her claim did not meet the threshold of an existing obligation.
The Court of Appeal allowed the appeal, set aside the orders of the court below, and dismissed Ms Sutton's summons with costs. The respondent was ordered to pay the costs of the appellants in relation to the applications for leave to appeal, the appeal, and the cross-appeal. The respondent was also granted a certificate under the *Suitors Fund Act* in relation to those costs, if qualified.
Orders
Orders of the court
(1) Extend to 25 May 2011 the time in which to seek leave to cross-appeal.
(2) Grant leave to appeal.
(3) Grant leave to cross-appeal.
(4) Dismiss the cross-appeal.
(5) Allow the appeal.
(6) Set aside the orders in the court below, and in lieu thereof order that the summons be dismissed with costs.
(7) Respondent to pay costs of the Appellants of the application for leave to appeal, application for leave to cross-appeal, the appeal, and the cross-appeal.
(8) Respondent to have a certificate under the Suitors Fund Act in relation to the costs in order (7) if qualified.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
On 3 November 2009 the Administrators advised the IRC that they did not consent to the continuation of Ms Sutton's proceedings. They continue to withhold that consent. To date the Supreme Court has not given leave for the IRC proceedings to continue, though the judgment appealed from envisaged that in some circumstances such leave might be given. Thus, the IRC proceedings are treated in this litigation as having been stayed pursuant to s 440D(1) Corporations Act while the voluntary administration was under way. On 6 October 2009 a representative of the Administrators sent to Ms Sutton's solicitor a copy of the First Report to Creditors, saying that they understood that Ms Sutton was a creditor of BEA and/or a related company of BEA. The enclosed report gave advice about the date and place of the first meeting of creditors, and requested submission of Proofs of Debt. The first meeting of creditors was held on 14 October 2009. Ms Sutton submitted a Proof of Debt on 13 October 2009. A Report to Creditors dated 29 October 2009 (which related to the affairs of both BEA and a related company, BE Australia WD 2 Pty Ltd (administrator appointed) (" BEWD2 ") was distributed. It reported that BEA "was sold through a Management Buy Out on 6 August 2009" for $1,000. Presumably this refers the assets of BEA having been sold, as the Administrators report that the book value of the assets sold was approximately $5.4m and that liabilities of $5.8m were assumed. A Balance Sheet as at 31 December 2008 showed a capital deficiency of more than $112m. The report included the statement: A second Supplementary Report to Creditors dated 5 January 2010 put forward a proposal for a DOCA. It estimated that creditors of BEA would receive eighty-four cents in the dollar under the DOCA, and would receive 0.43 cents in the dollar on a liquidation. Ms Sutton was invited to attend creditors' meetings in October, November and December 2009 and in January 2010. The judge found that Ms Sutton was admitted to vote at those meetings as a contingent creditor, with the value of her claim being assessed at $330,000. At a creditors' meeting on 13 January 2010 creditors that were related entities of the First Applicant, owed debts of nearly $122 m, voted in favour of the DOCA. Broadly, the terms of the DOCA were that the inter-company indebtedness would not be paid until all of the creditors had been paid, and any funds remaining after distribution to admitted creditors were to be paid to the United States parent of BEA. On 9 February 2010 Ms Sutton submitted a Proof of Debt under the DOCA, for a total of $535,048.30. A schedule showed that the claim was made up as follows: On 17 February 2010 a letter from the solicitors for the Administrators rejected Ms Sutton's Proof of Debt in its entirety. The judge summarised the ground of rejection as being: At the hearing the primary judge had before him a letter written by the solicitors for the Administrators on the previous day, that set out the then current position concerning the estimated dividend to creditors: