Blundell v Macrocom Pty Ltd - [2004] NSWSC 895

Reported Decision:
50 ACSR 549

Supreme Court

CITATION: Blundell v Macrocom Pty Ltd [2004] NSWSC 895 revised - 29/09/2004

HEARING DATE(S): 27/09/04

JUDGMENT DATE:
28 September 2004

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Administrator's application for directions refused. Winding up order made.

CATCHWORDS: CORPORATIONS - voluntary administration - pending winding up application - whether administrator has power to compromise pre-existing debt of applicant for winding up - whether power properly exercisable - company insolvent - direction refused - winding up order made

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.437A, 442A, 459E

CASES CITED: Re Ansett Australia Ltd (2001) 39 ACSR 355
Re NC RE Capital Ltd (1999) 32 ACSR 418
St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd [2004] NSWSC 851

PARTIES :
Barnett Blundell - Plaintiff
Macrocom Pty Limited - Defendant

FILE NUMBER(S): SC 4368/04

COUNSEL: Mr A A Loel, Solicitor - Plaintiff
Mr T Hall - Defendant

SOLICITORS: Toomey Pegg Drevikovsky - Plaintiff
Matthews Folbigg Pty Limited - Defendant

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

BARRETT J

TUESDAY, 28 SEPTEMBER 2004

4368/04 – BARNETT BLUNDELL v MACROCOM PTY LTD

JUDGMENT

1 The plaintiff is a former employee of the defendant. On or about 12 July 2004, he served on the defendant a creditor’s statutory demand under s.459E of the Corporations Act 2001 (Cth) in respect of debts totalling $84,166.75 for unpaid salary. There is a statement in the affidavit of the defendant’s sole director that the plaintiff was also a director of the defendant and ceased to hold office as such on 30 June 2003. Relying on the defendant’s non-compliance with the statutory demand, the plaintiff filed an originating process on 5 August 2004 seeking a winding up order.

2 The originating process was returnable on 6 September 2004. On 2 September 2004, however, a secured creditor of the defendant acted under s.436C to appoint an administrator. When the winding up application came before the court on 6 September 2004, Campbell J stood it over to 20 September 2004 after noting evidence suggesting that a deed of company arrangement might possibly be proposed.

3 When the winding up application came before me on 20 September 2004, the administrator, Mr Whitton, sought leave to file an interlocutory process containing an application for directions under s.447D of the Act which empowers the court to give directions to an administrator “about a matter arising in connection with the performance or exercise of any of the administrator’s functions and powers”. The matter in respect of which the administrator thus foreshadowed a request for the court’s guidance was whether the plaintiff’s claim upon which the winding up application was based might be compromised in such a way that a slightly smaller sum was paid as an expense of the administration, whether that sum should be paid “as a priority creditor claim in the liquidation of the company” and as to the extent to which any security should be provided for…

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.

Continue reading Blundell v Macrocom Pty Ltd

Details

AGLC: Blundell v Macrocom Pty Ltd [2004] NSWSC 895
Case: [2004] NSWSC 895
Decision Date: 28 September 2004

CaseChat Overview and Summary

Blundell sought to wind up Macrocom Pty Ltd. Macrocom, facing financial difficulties, entered voluntary administration, and Macrocom's administrator negotiated with Blundell, seeking to compromise the pre-existing debt. Blundell applied to wind up Macrocom, and Macrocom's administrator opposed Blundell's application. The court had to determine whether the administrator had the power to compromise the pre-existing debt and if such power could be properly exercised. The court considered whether the company was insolvent and if the proposed compromise was in the best interests of creditors.

The court found that the administrator had the power to compromise the pre-existing debt under the Corporations Act, but this power was not properly exercisable in the circumstances. The court concluded that Macrocom was insolvent, and the proposed compromise was not in the best interests of creditors. The court rejected the administrator's direction and granted Blundell's application to wind up Macrocom. The court's decision hinged on the administrator's failure to demonstrate that the compromise was fair and equitable to all creditors and that it would achieve a better outcome than immediate winding up.

The final orders of the court were that Macrocom Pty Ltd be wound up, and the court's decision to refuse the administrator's direction was upheld. The winding up order was made in favour of Blundell, who had sought to wind up Macrocom. The court's ruling emphasised the importance of considering the best interests of all creditors when exercising powers under the Corporations Act and highlighted the limitations on the administrator's authority in compromising debts.

Orders