Briggs v Stoddart Nolan Pty Limited

[1997] IRCA 208

DECISION NO:208/97

CATCHWORDS

CORPORATIONS - administration - process begun in Industrial Relations Court to enforce order for compensation for unlawful termination - third party indebted to corporation - garnishee order - administrator appointed - leave of Court sought to continue enforcement process

Corporations Law ss 435A, 440F
Corporate Law Reform Act 1992
Workplace Relations Act 1996 s347(1)

Wai Chee Robinson, ‘Statutory Moratorium on Proceedings Against a Company’ (1996) 24 Australian Business Law Review 429

JOHN GARTH BRIGGS v STODDART NOLAN PTY LIMITED
VI 2128 of 1996

Before:  MARSHALL J
Place:  MELBOURNE
Date of hearing:         18 JUNE 1997
Date of judgment:      18 JUNE 1997

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA  
VICTORIA DISTRICT REGISTRY                  
  No. VI 2128 of 1996

B E T W E E N :  JOHN GARTH BRIGGS

Applicant

A N D  STODDART NOLAN PTY LIMITED
  Respondent

BEFORE:     MARSHALL J
PLACE:        MELBOURNE
DATE:          18 JUNE 1997

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1. The notice of motion is dismissed.

Note:  Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
  No. VI 2128 of 1996

B E T W E E N :  JOHN GARTH BRIGGS

Applicant

A N D  STODDART NOLAN PTY LIMITED
  Respondent

BEFORE:     MARSHALL J
PLACE:        MELBOURNE
DATE:          18 JUNE 1997

REASONS FOR JUDGMENT

Delivered ex tempore - revised from the transcript

On 25 November 1996 Judicial Registrar Ryan ordered that Stoddart Nolan Pty Limited, the respondent, pay to Mr Briggs the sum of $21,120 compensation, as a result of the respondent’s termination of Mr Briggs’ employment in breach of Div 3 of Part VIA of the Workplace Relations Act.  A similar order was made in favour of Ms Murphy in the sum of $6960. 

In December 1996 Mr Briggs and Ms Murphy applied to enforce the order of Judicial Registrar Ryan, and on 20 December 1996 the District Registrar of the Court made an order for seizure of the respondent’s property.  On 20 March 1997 Judicial Registrar Ryan made a garnishee order against O'Connor Management Pty Limited, (“O'Connor”) and Dominic Cirillo in favour of Mr Briggs and Ms Murphy.  O'Connor and Mr Cirillo are indebted to the respondent and are making payments to it in respect of that debt. 

On 4 April  1997 the respondent appointed an administrator.  One payment received from O'Connor and Mr Cirillo by Mr Briggs and Ms Murphy's former solicitors was returned by those solicitors to the administrator.  On 16 June 1997, Mr Briggs and Ms Murphy filed a notice of motion seeking the following orders:

“(1)      that all monies paid by O'Connor Management Pty Limited (ACN 005 921 175) Dominic Cirillo to Sebor (Aust) Pty Limited (ACN 068 652 326) administrators after 20 March 1997 be released to the applicants - judgment creditors (John Garth Briggs and Jodilee Murphy) without delay;

(2) that the $2000 paid by O'Connor Management to Faram Ritchie & Davies acting solicitors for the judgment creditors, and subsequently released by Faram Ritchie & Davies to Sebor (Aust)’s administrators, be released to the judgment creditors (applicants John Garth Briggs and Jodilee Murphy) without delay.

(3) that all monies outstanding in respect of the garnishee order VI 2128 of 1996 and VI 2129 of 1996 be paid by the garnishees O'Connor Management, to the applicants (judgment creditors) John Garth Briggs and Jodilee Murphy without delay.”

What is effectively sought by the notice of motion is the leave of the Court pursuant to section 440F of the Corporations Law to proceed with the enforcement process in this matter in relation to the property of the respondent, notwithstanding that the respondent has appointed an administrator.  Section 440F provides as follows:

“During the administration of a company, no enforcement process in relation to property of the company can be begun or proceeded with, except:    

(a) with the leave of the Court; and

(b) in accordance with such terms (if any) as the Court imposes.”

Section 440F was introduced by the Corporate Law Reform Act 1992 which I will refer to as “the 1992 amendment”. It is found in Pt 5.3A of the Corporations Law. Section 435A of the Corporations Law, also found in that Part, provides that:

“The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.”

In the Second Reading Speech the then Attorney General, the Honourable Michael Duffy, referred to the "insolvency reforms" that had been introduced in the Corporate Law Reform Bill.  Mr Duffy said at Hansard page 2004, 3 November 1992:

“In relation to the multi-faceted insolvency reforms, special mention should be made of those relating to companies in financial difficulty.  It is often said of our insolvency laws that they are so inflexible and expensive to use that it is impossible for a company to seek to recover through an insolvency administration without facing the likelihood of liquidation.  This is because most current forms of administration suffer from the fatal flaw that individual creditors can disrupt them to the point where they become unworkable.

What is really needed, when a basically sound company faces solvency difficulties, is a capacity for that company to obtain a breather.  This Bill offers that opportunity.  Directors will be able to appoint an administrator, who will have the benefit of a moratorium on actions against the company while formulating a plan of action for consideration by the creditors. The emphasis is on informality and flexibility.  The emphasis is also on speed of action.  The procedure does not allow for indefinite administrations which can occur, for example, under the United States chapter II approach.  The emphasis is also on appropriate protection of creditors’ interests, so that they will find that they are not unduly disadvantaged by the short moratorium proposed.”

The Explanatory Memorandum accompanying the Bill referred at para 524 - 525 to section 440F in the following way:

“The earlier provisions in this Division will prevent actions being brought or continued against a company which is under administration.   The final two sections in the Division will complement the earlier provisions by providing that, where a judgment against the company has been obtained, it can be enforced only in very limited circumstances.  This is again designed to ensure that the financial position of the company is as nearly as possible preserved throughout the moratorium period.

Proposed section 440F will provide that, during the administration, no enforcement process in relation to the property of the company can be begun or proceeded with, without the leave of the Court.  ‘Enforcement process’ will be defined in section 9 to mean execution against that property or any other enforcement process in relation to that property that involves a court or a sheriff.  Proposed section 440F will thus prevent only enforcement process of a judicial nature against the company, and will not prevent such ‘self-help’ remedies as the termination of a contract to which the company is a party, where the company is in breach of that contract.” (emphasis supplied)

The relevant key elements that can be discerned from the objects of Pt 5.3A, the Second Reading Speech and the Explanatory Memorandum are as follows:

1. It will be the exceptional case in which leave is granted under s 440F.

1. During administration the emphasis is on preservation of the company's assets to maximise the prospect of its survival, or at least the obtaining of a better return for creditors and members than would otherwise occur in an immediate winding up of the company.

In an article entitled ‘Statutory Moratorium on Proceedings Against a Company’ (1996) 24 Australian Business Law Review 429 at 429, Wai Chee Robinson referred to Pt 5.3A as having been introduced:

“with the recognition that rehabilitation of ailing businesses is preferable to their dissolution.”

I have been informed by Mr Connock that a second meeting of creditors has been adjourned and is yet to be reconvened.  I have also been informed that the respondent’s assets have been subject to a fixed and floating charge in favour of the National Australia Bank.

In the circumstances it appears preferable to allow the second meeting of creditors to be reconvened in a situation where the prospects of the respondent’s survival is not diminished by the administrator having to disburse funds currently under his control.  The submissions put today by Mr Briggs on his own behalf are ones with which I have great sympathy.  They are that he was unlawfully terminated by his employer, sought redress in the Court and obtained an order of the Court and has struggled to seek to enforce it. 

Unfortunately the Court is not able solely to have regard to considerations of that sort, or let considerations of that sort override its duty, which is to determine whether leave should be granted in the totality of the circumstances.

Having regard to the objects of Pt 5.3A, the comments of the Minister in the Second Reading Speech, the Explanatory Memorandum, the commentary on the Part as addressed by Ms Robinson and in the absence of other judicial precedents in the area on what is a relatively new piece of legislation, the Court is of the view that the applicant in this case has not demonstrated a sufficient legal basis for the grant of leave under s 440F. No reason has been put forward as to why this is an exceptional case in which countervailing factors apply to override the objects of the relevant legislation. In my view the company's assets should be preserved in the interim whilst under administration to maximise its prospect of survival.

Having regard to the above matters the order of the Court will be that the notice of motion be dismissed.

Mr Connock made an application for costs of the notice of motion but was unable to explain to the Court how such an application could possibly succeed in the light of s 347(1) of the Workplace Relations Act 1996 I dismiss the application for costs.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of his Honour Justice Marshall as recorded in the transcript and revised by his Honour.

Associate:  
Dated:  

APPEARANCES

The applicant appeared in person

Counsel for the Respondent:  R. Connock
Solicitor for the Respondent:  Davis Ford

Date of hearing:  18 June 1997

Date of judgment:  18 June 1997