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Boz One Pty Ltd v McLellan

Boz One Pty Ltd v McLellan

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Case Copied 23 April 2015 80 min read

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0082

BOZ ONE PTY LTD and WALLABAH PTY LTD	First Appellant Second Appellant
v
ANDREW JAMES MCLELLAN, CRAIG DAVID CROSBIE, INVESTEC BANK (AUSTRALIA) LIMITED and GADENS LAWYERS	First Respondent Second Respondent Third Respondent Fourth Respondent

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JUDGES:	WHELAN, SANTAMARIA and KYROU JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 February 2015
DATE OF JUDGMENT:	23 April 2015
MEDIUM NEUTRAL CITATION:	[2015] VSCA 68
JUDGMENT APPEALED FROM:	Boz One Pty Ltd v McLellan [2014] VSC 208 (Digby J)

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RECEIVERS — Exercise of power of sale under a deed of charge — Charged property comprised loans made by chargor and shares owned by chargor in a private company — Receivers sold charged property by private sale — Whether receivers failed to take all reasonable care to sell the charged property for not less than its market value, in breach of s 420A(1)(a) of the Corporations Act 2001 (Cth) — Whether receivers obliged to sell the charged property on the open market — Whether receivers obliged to engage selling agents and to advertise the sale of the charged property.

RECEIVERS — Scope of duty under s 420A(1) of the Corporations Act 2001 (Cth) — Applicable legal principles.

CORPORATIONS — Deed of charge — Whether chargee and director of chargor acted in concert and were thus associates for the purposes of s 267(1) of the Corporations Act 2001 (Cth) — Whether by servicing a notice of demand on the chargor, the chargee purported to take a step in the enforcement of the charge for the purposes of s 267(1) of the Corporations Act2001 (Cth).

CORPORATIONS — Execution of contracts — Sole director of a company which did not have a secretary purported to sign a deed of charge as ‘Director/Secretary’ — Whether deed validly executed — Principles relating to execution of a contract by a director as an act of the company as distinct from an act of an agent for and on behalf of the company — Corporations Act 2001 (Cth) s 127 — Principles of unanimous assent discussed.

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APPEARANCES:	Counsel	Solicitors
For the appellants	Mr D B Clough	Goldsmiths Lawyers
For the first and second respondents	Mr G D Dalton	Moray & Agnew
For the third respondent	Mr H N G Austin	Arnold Bloch Liebler
For the fourth respondent	Mr S J Maiden	Colin Biggers & Paisley

TABLE OF CONTENTS

Introduction and summary

Facts

Incorporation of IPS to conduct the slipway business

The Wallabah debt

Loan by Investec to Glodale Pty Ltd

IPS’s draft balance sheet as at 30 June 2002

Loan by Lewis Securities to Wallabah

Appointment of Receivers to Boz One and their initial investigations

IPS’s draft balance sheet as at 30 June 2003

Events in June-September 2003

Events in October 2003, including the ‘in principle’ agreement of 9 October 2003

Events in November-December 2003

Settlement of the transaction to sell the Sold Assets on 12 December 2003

Events after the settlement on 12 December 2003

The…

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: [2015] VSCA 68
Decision Date: 23 April 2015

CaseChat Overview and Summary

The case of Boz One Pty Ltd v McLellan involved a dispute over the sale of charged property under a deed of charge. The property in question consisted of loans made by the chargor to the chargee and shares owned by the chargor in a private company. The receivers sold the charged property through a private sale, and the chargor sought to challenge the sale on the basis that the receivers failed to take all reasonable care to sell the property for no less than its market value, in breach of section 420A(1)(a) of the Corporations Act 2001 (Cth). The chargor also argued that the receivers were obliged to sell the property on the open market and to engage selling agents and advertise the sale.

The legal issues before the court were whether the receivers were required to take all reasonable care to sell the charged property for no less than its market value, and whether the receivers were obliged to sell the property on the open market and engage selling agents and advertise the sale. The court considered the relevant statutory provisions and case law on the scope of the duty under section 420A(1) of the Corporations Act 2001 (Cth). The court also considered whether the chargee and a director of the chargor had acted in concert and were thus associates for the purposes of section 267(1) of the Corporations Act 2001 (Cth). Additionally, the court examined the validity of the execution of a deed of charge by a sole director of a company that did not have a secretary, who signed the deed as ‘Director/Secretary’.

The court found that the receivers were required to take all reasonable care to sell the charged property for no less than its market value, but that the obligation to advertise the sale and engage selling agents was not a strict requirement. The court held that the chargee and the director of the chargor had not acted in concert and were not associates for the purposes of section 267(1) of the Corporations Act 2001 (Cth). The court also found that the deed of charge was validly executed by the sole director of the company who signed as ‘Director/Secretary’, as the execution was in accordance with the principles relating to the execution of a contract by a director as an act of the company. The court concluded that the receivers had not breached their duty under section 420A(1)(a) of the Corporations Act 2001 (Cth) and that the sale of the charged property was valid.

The court ordered that the sale of the charged property be upheld and that the chargor pay the costs of the proceeding.

Orders