FEDERAL COURT OF AUSTRALIA
Benjamin Hornigold Ltd v John Bridgeman Limited [2023] FCA 1195
File number: NSD 967 of 2023 Judgment of: MARKOVIC J Date of judgment: 7 September 2023 Date of publication of reasons: 9 October 2023 Catchwords: CORPORATIONS – leave to commence proceeding against company in restructuring pursuant to s 453S of the Corporations Act 2001 (Cth) – where expiry of limitation period is imminent – where there is a real likelihood of termination of restructuring process – leave granted Legislation: Corporations Act 2001 (Cth) ss 440D, 452A, 453B(1), 453C(1), 453S, 471B, 766A(1), 912A(1), 917A, 917B, 917E, 917F(1)
Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 (Cth)
Corporations Regulations 2001 (Cth) reg 5.3B.03(1) and reg 7.6.02AAA
Cases cited: Australian Securities and Investments Commission v Marco (No 5) [2020] FCA 1512
Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 285 ALR 207; [2011] NSWSC 1305
Lianos v Order of AHEPA NSW Inc (No 2) [2020] NSWCA 304
Re Ozrac Engineering New South Wales Pty Ltd (in liq) [2013] NSWSC 740
Re Reed Constructions Australia Pty Ltd (In Liquidation) [2015] NSWSC 2033
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 33 Date of hearing: 7 September 2023 Counsel for the Plaintiff: Mr J Hynes Solicitor for the Plaintiff: Corrs Chambers Westgarth ORDERS
NSD 967 of 2023 BETWEEN: BENJAMIN HORNIGOLD LIMITED
Plaintiff
AND: JOHN BRIDGEMAN LIMITED
First Defendant
MR BRYAN RAYMOND COOK
Second Defendant
MR VINCENT ROY GORDON (and another named in the Schedule)
Third Defendant
ORDER MADE BY:
MARKOVIC J
DATE OF ORDER:
7 SEPTEMBER 2023
THE COURT ORDERS THAT:
1.Pursuant to s 453S(1)(b) of the Corporations Act 2001 (Cth), the plaintiff be granted leave to commence the proceeding against the fourth defendant, on the condition that no further step is to be taken in the proceeding against the fourth defendant without the leave of the Court.
2.The plaintiff’s solicitors to provide a copy of these Orders to the fourth defendant by 4.00 pm AEST on 7 September 2023.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MARKOVIC J:
On 7 September 2023 I made an order pursuant to s 453S of the Corporations Act 2001 (Cth) that the plaintiff, Benjamin Hornigold Limited (BHL), be granted leave to commence proceedings against the fourth defendant, JB Markets Pty Ltd (JBM), on the condition that no further step is taken in the proceeding against JBM without the leave of the Court. These are my reasons for making those orders.
BACKGROUND
On 6 September 2023 BHL commenced this proceeding by filing an originating process and affidavit in support affirmed by Michael Russell Catchpoole, the solicitor for BHL. There are four defendants to the proceeding: John Bridgeman Limited (JBL), Bryan Raymond Cook, Vincent Roy Gordon and JBM. Mr Cook is a former director of BHL and Mr Gordon is a former…
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- Case
- [2023] FCA 1195
- Decision Date
CaseChat Overview and Summary
The court considered the imminent expiry of the limitation period for some claims and the potential termination of the restructuring process. The court found that these factors provided a compelling reason to allow BHL to proceed with its claims against JBM, despite the restructuring. The court reasoned that allowing BHL to commence the proceeding was necessary to protect its rights and interests, given the imminent limitation period and the likely termination of the restructuring. The court granted leave to BHL to commence the proceeding against JBM, subject to certain conditions, including that no further steps be taken without the court's leave.
The court's decision was based on the specific circumstances of the case, where the limitation period was close to expiring and the restructuring process was likely to terminate. The court acknowledged the general principle that creditors should not be allowed to sue companies in restructuring but found that the exceptional circumstances warranted an exception. The court made an order granting BHL leave to commence proceedings against JBM, with the condition that no further steps be taken without the court's leave.
Orders
Orders of the court
1. Pursuant to s 453S(1)(b) of the Corporations Act 2001 (Cth), the plaintiff be granted leave to commence the proceeding against the fourth defendant, on the condition that no further step is to be taken in the proceeding against the fourth defendant without the leave of the Court.
2. The plaintiff’s solicitors to provide a copy of these Orders to the fourth defendant by 4.00 pm AEST on 7 September 2023.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
On 7 September 2023 I made an order pursuant to s 453S of the Corporations Act 2001 (Cth) that the plaintiff, Benjamin Hornigold Limited (BHL), be granted leave to commence proceedings against the fourth defendant, JB Markets Pty Ltd (JBM), on the condition that no further step is taken in the proceeding against JBM without the leave of the Court. These are my reasons for making those orders. BACKGROUND On 6 September 2023 BHL commenced this proceeding by filing an originating process and affidavit in support affirmed by Michael Russell Catchpoole, the solicitor for BHL. There are four defendants to the proceeding: John Bridgeman Limited (JBL), Bryan Raymond Cook, Vincent Roy Gordon and JBM. Mr Cook is a former director of BHL and Mr Gordon is a former director of both BHL and JBL. BHL is a listed investment company which has been quoted on the Australian Stock Exchange since 12 May 2017. JBL provided investment management services. From 8 July 2008 onwards JBM was the holder of an Australian Financial Services Licence (AFSL). From 1 March 2017 JBL was appointed as JBM’s representative to provide certain financial services on behalf of JBM to retail and wholesale clients. Those services included: (1)providing financial product advice for, among other products, derivatives and securities; and (2)dealing in, among other financial products, derivatives and securities by applying for, acquiring, varying or disposing of those financial products on behalf of other persons. On 29 March 2017 BHL entered into an exclusive management services agreement with JBL by which JBL agreed, among other things, to assume responsibility for achieving BHL’s investment policy and to manage its investment portfolio as defined in the management services agreement. BHL’s claim The facts and circumstances relied on by BHL in support of the relief sought by it in the originating process are set out in a draft statement of claim which was in evidence before me. In summary BHL alleges:(1)as against its former directors, Messrs Cook and Gordon, that:(a)they breached their duties owed to it by allowing BHL to enter into certain loan transactions between 11 September 2017 and October 2018 and by failing to exercise reasonable care and diligence in connection with the evaluation of those transactions; and (b)those loan transactions exceed $4 million in value and seeks that amount plus accrued interest as loss and damage suffered as a consequence of the alleged breaches;(2)as against JBL that it managed BHL’s investment portfolio and provided financial advice in relation to its investments, including the loan transactions which are the subject of the claims against Messrs Cook and Gordon, and in doing so it: (a)provided financial services to BHL within the meaning of s 766A(1) of the Corporations Act and did so as JBM’s representative; (b)breached its contractual obligations and implied duty of care and fiduciary duties owed to BHL; and(c)was knowingly involved in the breaches of duty by Messrs Cook and Gordon; (3)as against JBM that:(a)pursuant to ss 917A, 917B, 917E and 917F(1) of the Corporations Act, JBM is responsible for JBL’s conduct in connection with the provision of financial services to BHL and is liable in connection with any loss suffered as a consequence of JBL’s conduct; and(b)as the holder of the AFSL, JBM contravened its duties under subss 912A(1)(a), (aa), (b), (c) and (ca) of the Corporations Act by failing to adequately monitor and/or train JBL in connection with JBL’s activities and provision of financial services.