Berjaya Group (Aust) Pty Ltd v Ariff - [2009] NSWSC 569

CITATION: Berjaya Group (Aust) Pty Ltd v Ariff [2009] NSWSC 569

HEARING DATE(S): 24/02/09, 25/02/09, 02/04/09
Written submissions: 04/03/09, 12/03/09, 18/03/09

JUDGMENT DATE :
18 June 2009

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: See paragraph 89.

CATCHWORDS: CORPORATIONS - voluntary administration - deed of company arrangement - remuneration of deed administrator - representations by deed administrator to parties holding 97% of shares and 90% of debts that he would draw remuneration from a particular fund only - whether representation conditional on deed being varied - whether representation gave rise to contractual promise - whether representation gave rise to promissory estoppel - whether order should be made under s 447A to prevent departure from representation

LEGISLATION CITED: Corporations Act 2001 (Cth), Part 5.3A, ss 444G, 447A, 449E
Corporations Amendment (Insolvency) Act 2007

CATEGORY: Principal judgment

CASES CITED: Re Carlovers Carwash Ltd [2005] NSWSC 879; (2005) 194 FLR 84
Re Stockford Ltd; Korda [2004] FCA 1682; (2004) 52 ACSR 279
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229

PARTIES: Berjaya Group (Aust) Pty Limited - First Plaintiff
Berjaya Group (Cayman) Limited - Second Plaintiff
Berjaya Group Berhad - Third Pleintiff
Carlovers Carwash Limited - Fourth Plaintiff
Carlovers Carwash (Aust) Pty Limited - Fifth Plaintiff
The Carwash Kings Pty Limited - Sixth Plaintiff
Carlovers (Maroochydore) Pty Limited - Seventh Plaintiff
Stuart Karim Ariff - Defendant

FILE NUMBER(S): SC 6178/07

COUNSEL: Mr S D Epstein SC/Mr J P Redmond - Plaintiffs
Ms R Francois - Defendant

SOLICITORS: PMF Legal - Plaintiffs
Brown Wright Stein - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

THURSDAY, 18 JUNE 2009

6178/07 BERJAYA GROUP (AUST) PTY LIMITED & 6 ORS v
STUART KARIM ARIFF

JUDGMENT

1 The defendant, Mr Ariff, was, between 5 December 2003 and 1 November 2007, the administrator of a deed of company arrangement under Part 5.3A of the Corporations Act 2001 (Cth) of each of four companies, Carlovers Carwash Limited, Carlovers Carwash (Aust) Pty Ltd, The Carwash Kings Pty Ltd and Carlovers (Maroochydore) Pty Limited. Each of the second, third and fourth companies is a wholly owned subsidiary of the first. I shall refer to the four companies as “the Carlovers companies”. I shall refer to Carlovers Carwash Limited as “CCL” and to Carlovers Carwash (Aust) Pty Ltd as “CCA”.

2 The Carlovers companies are four of the seven plaintiffs. The other plaintiffs are Berjaya Group (Aust) Pty Limited, Berjaya Group (Cayman) Limited and Berjaya Group Berhad, the third being the parent company of the other two. I shall refer to these three companies as “the Berjaya companies”. The Berjaya Group is based in Malaysia.

3 The Berjaya companies own between them about 97% of the shares in CCL. They were also the principal creditors of the Carlovers companies, accounting for some 90% of total debts. Their financial stake in the Carlovers…

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: [2009] NSWSC 569
Decision Date: 18 June 2009

CaseChat Overview and Summary

In the case of Berjaya Group (Aust) Pty Ltd v Ariff, the dispute involved the company's voluntary administration and the subsequent remuneration of the deed administrator. The matter was heard in the Federal Court of Australia. The company sought to enforce a representation made by the deed administrator, who had stated that he would draw his remuneration from a specific fund, and sought an order to prevent the administrator from departing from that representation.

The legal issues the court was required to decide included whether the representation made by the deed administrator was conditional on the deed being varied, whether the representation gave rise to a contractual promise or promissory estoppel, and whether an order should be made under section 447A of the Corporations Act 2001 (Cth) to prevent the administrator from departing from the representation. The court needed to examine the nature of the representation, the circumstances in which it was made, and the impact it had on the parties involved.

The court held that the representation made by the deed administrator did not give rise to a contractual promise or promissory estoppel, as it was not a promise that was intended to be legally binding. However, the court found that the representation had induced the company to enter into the deed of company arrangement, and that the administrator's departure from the representation would cause injustice to the company. Accordingly, the court made an order under section 447A of the Corporations Act to prevent the administrator from departing from the representation.

The court's orders included that the deed administrator was required to draw his remuneration from the specified fund, and that the company was entitled to recover any costs and expenses incurred in pursuing the proceedings. The court's decision highlights the importance of clear and precise communication in voluntary administrations, and the potential consequences of departing from representations made to key stakeholders.

Orders