Dallhold Investments Pty Ltd (In Liq) v Dallhold Estates (UK) Pty Ltd

Re: DALLHOLD INVESTMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVER AND MANAGER
APPOINTED)
And: DALLHOLD ESTATES (U.K.) PTY LIMITED (PROVISIONAL LIQUIDATOR APPOINTED)
No. G3093 of 1991
FED No. 741
Corporations
6 ACSR 378
(1991) 10 ACLC 1374

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
CORPORATIONS LIST
Gummow J.(1)

CATCHWORDS

Corporations - Australian corporation in provisional liquidation - only significant asset located in England - whether letter of request should issue to English Court to act in aid of and be auxiliary to this Court - whether it would be appropriate to seek an administration order under the Insolvency Act 1986 (U.K.).

Bankruptcy Act 1966

Corporations Law

Companies (Western Australia) Code 1981

Law of Property Act 1925 (U.K.)

Rent (Agriculture) Act 1976 (U.K.)

Protection from Eviction Act 1977 (U.K.)

Insolvency Act 1986 (U.K.)

Agricultural Holdings Act 1986 (U.K.)

Landlord and Tenant Act 1987 (U.K.)

Hardie Rubber Company Pty Ltd v General Tire and Rubber Company (1973) 129 CLR 521

Parsons v Martin (1984) 5 FCR 235

Pearce v Button (1985) 8 FCR 40

Elna Australia Pty Ltd v International Computer (Aust.) Pty Ltd (1987) 14 FCR 461

HEARING

SYDNEY

#DATE 27:11:1991

Counsel and Solicitors for Mr Nigel Cotman instructed by Kemp
Dallhold Investments Strang and Chippindall.
Pty Limited:

Counsel and Solicitors for Mr S.J. Motbey instructed by Smits Leslie
Lindsey Trading Properties Barwick.
Inc. and Mr Bollag:

Solicitors for the Mr P.M. Stern of Dunhill Madden Butler
Provisional Liquidator of
Dallhold Estates (U.K.)
Pty Limited (Mr H.C. Thomas):

ORDER

Declares that it is desirable to request the assistance of the English Courts to act in aid of and be auxiliary to this Court in proceeding G3093 of 1991.

Orders that the solicitors for the liquidator of Dallhold Investments Pty Limited on or before 29 November 1991 lodge with the District Registrar a form of appropriate Letter of Request.

Orders that when settled that Letter of Request issue accordingly.<
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

JUDGE1

On 9 August 1991, on the application of Dallhold Investments Pty Limited ("Dallhold Investments") a provisional liquidator was appointed, by order of this Court, to Dallhold Estates (U.K.) Pty Limited ("Dallhold Estates"). The application for the appointment of the provisional liquidator was accompanied by an application to wind up Dallhold Estates. No winding-up order has yet been made.

Dallhold Estates is a wholly owned subsidiary of Dallhold Investments. On 9 August 1991, the directors of Dallhold Estates were Mr Alan Bond, Mr M.C. Cross and Mr N.J. Turner. The only director resident in the United Kingdom was Mr N.J. Turner. Messrs Cross and Bond were also directors of Dallhold Investments.
Dallhold Estates was incorporated on 20 June 1985 as Teilas Pty Limited, under the Companies (Western Australia) Code 1981. It changed its name to Dallhold Resources Management (U.K.) Pty Limited on 12 October 1987, and there was a further change, to its present name, on 19 October 1988.
Dallhold Investments had been placed in liquidation by order of this Court made on 5 July 1991. On 18 July 1991, the liquidator of Dallhold Investments had made demand upon Dallhold Estates for payment of moneys due and owing in the sum of $2,331,079.80. That indebtedness remains unsatisfied and its existence has not been challenged.
The only significant asset of Dallhold Estates appears to be a leasehold interest in an agricultural holding in England. The property is known as the Upp Hall Estate ("the Estate"), and is situated in Hertfordshire. The Estate comprises about 940 acres and is located some 27 miles from Cambridge and 33 miles from London. There is a large manor house, tithe barn, 8 estate houses and extensive modern farm buildings. Farming activities have been conducted on an arable system based on winter wheat, winter barley, beans and rape with the grassland being let as seasonal grazing.
On 14 August 1991, upon the application of Dallhold Investments, Ferris J., sitting in the Companies Court in the Chancery Division of the High Court of Justice, (in proceeding 9287 of 1991) made an order appointing a provisional liquidator of Dallhold Estates, namely Mr T.E. Gumbley. The Australian provisional liquidator is Mr H.C. Thomas.
The lessor of the Estate is a Panamanian company, Lindsey Trading Properties Inc. ("Lindsey"). It claims to be a creditor of Dallhold Estates in a sum which, on 30 August 1991, the date of its notice of intention to appear in the present proceedings, it fixed at pounds 93,887.54. In addition, Mr Jurg Bollag, who describes himself as a "financial consultant" and has an address in the Canton of Zug in Switzerland, claims by notice of demand on Dallhold Estates dated 6 August 1991, a debt of pounds 373,176 in respect of moneys advanced to Dallhold Estate s pursuant to alleged oral agreements made on various dates between April 1989 and July 1991. Together with Dallhold Investments, Lindsey and Mr Bollag are the three principal creditors of Dallhold Estates. There are some 27 trade creditors with claims, which, on 5 September 1991, were approximately pounds 30,000. Mr Bollag appears to exercise control over the affairs of Lindsey.
By amended application filed in Court on 5 November 1991, Dallhold Investments claims, in addition to orders for the winding-up of Dallhold Estates, various other orders including an order pursuant to sub-s. 581 (4) of the Corporations Law ("the Law").
The effect of this provision is that this Court, as a court having jurisdiction under the legislation, may request a court of a country other than Australia, being a court which has jurisdiction in "external administration matters" to act in aid of, and be auxiliary to, this Court in an "external administration matter". That phrase is defined in s. 580 of the Law so as to include a matter relating to the winding-up of Dallhold Investments. Sub-section 581 (3) provides for the converse situation, that is to say the receipt of and action upon a letter of request from a court of a country other than Australia. In the United Kingdom, comparable provision for co-operation between courts, including courts of other countries, exercising jurisdiction in relation to insolvency, is found in s. 426 of the Insolvency Act 1986 (U.K.) ("the Insolvency Act").
Dallhold Investments (with the support of the Australian provisional liquidator of Dallhold Estates) seeks the issue of a Letter of Request addressed to the High Court of Justice seeking assistance by the making of an administration order in respect of Dallhold Estates under Part II of the Insolvency Act. Lindsey and Mr Bollag oppose that course and seek to have the winding-up application dealt with now. By their application filed 13 September 1991, Lindsey and Mr Bollag seek to be substituted as applicants in lieu of Dallhold Investments and they now seek the making forthwith of a winding-up order of Dallhold Estates.
In order to assess those submissions, it is necessary to look further at the nature of the interest of Dallhold Estates in the Estate.
In July 1987, a Western Australian company, Wydgee Pastoral Company Pty Limited ("Wydgee") granted a lease of the Estate to Dallhold Estates for a term of five years from 30 July 1987 at a yearly rent of pounds 50,000 payable by equal quarterly payments in advance. Dallhold Investments joined in the lease as surety. By a transfer dated 30 July 1987, Wydgee transferred the freehold interest in the Estate, subject to the lease of Dallhold Estates, to Lindsey in consideration of payment of pounds 1.86m. The transfer included the grant of an option by Lindsey to Dallhold Investments to purchase the Estate, exercisable before 7 July 1992, for what was defined therein as the "open market value" of the estate.
The evidence is that in the ordinary course, upon the expiry of the term in July 1992, the interest of Dallhold Estates would devolve to a yearly tenancy by virtue of the Agricultural Holdings Act 1986 (U.K.) ("the Agricultural Holdings Act"), thereby giving the tenant a secure interest which would be assignable and have a substantial value. The evidence includes a valuation, dated 6 September 1991, of the leasehold interest at pounds 1m. The evidence also includes expressions of interest from prospective purchasers for prices between pounds 500,000 and pounds 1.285m. On the other hand, if in the meantime a winding-up order was made either in this country or in England against Dallhold Estates, the result would be to forfeit the lease and, as an agricultural lease, no relief from the forfeiture would be available under s. 146 of the Law of Property Act 1925 (U.K.).
However, Mr Bollag claims to have caused Lindsey, on 26 June 1989, to charge its freehold reversion to an English company, Figurehead Finance Limited ("Figurehead 1") to secure an indebtedness of pounds 3m.
Enquiries made by the provisional liquidators of Dallhold Estates since August 1991 have disclosed the following. On 9 January 1991, Figurehead 1 changed its name to Figurehead Holdings plc. On the same day, a subsidiary of Figurehead 1, Mandigg Limited, another English company, changed its name to Figurehead Finance plc ("Figurehead 2"). Mr J.F. Casson was a director of both Figurehead 1 and Figurehead 2. On 1 October 1991, Figurehead Holdings plc was placed into a creditor's voluntary liquidation in England with a deficiency, as regards all creditors of 40,339,117, and as regards members of 48,272,669. In or about August 1991, a company formed in the Irish Republic, Anglo Irish Bank Corporation plc ("Anglo Irish") was registered in England as having a place of business there. Two of the directors of Anglo Irish have at all material times also been directors of Figurehead 1.
On 30 September 1991, the English solicitors for Anglo Irish wrote to solicitors representing Dallhold Estates stating that on 5 September 1991 their client had completed in its favour a "legal transfer" of the loan facility "granted by Figurehead Finance plc to Lindsey Trading Properties Inc" and a transfer of all the supporting security. This raises the question of the identity of the party which transferred the "loan facility" and supporting security to Anglo Irish, and the right of Anglo Irish, if any, to acquire possession of the Estate.
Part of the secured rights in respect of the Estate which are claimed by Anglo Irish arise under a purported deed of surrender by Dallhold Estates of its lease, in favour of Lindsey. The instrument appears to have been executed by Dallhold Estates under its common seal, and states that it was signed and sealed for and on behalf of Lindsey by Mr Jurg Bollag. It bears an unstated date in 1989. No consideration is expressed. Clause 1 states:
"In consideration of these presents (Dallhold Estates) as beneficial
owner hereby surrenders and yields up and releases to (Lindsey) all
its estate interest and rights in the demised premises to the intent
that (the term of five years from 30 July 1987) and all or any other
estate interest or rights of (Dallhold Estates) in the demised
premises whether granted by or arising from the Lease or by or from
any deed or document supplemental to the Lease or otherwise shall
merge and be extinguished in the reversion immediately expectant on
the Term."
This deed was apparently delivered in escrow to the solicitors for Figurehead 1 in support of a charge granted it by Lindsey on 26 June 1989, as I have earlier indicated. It appears to have been executed in implementation of the terms of a written agreement between Lindsey and Dallhold Estates, said by Mr Bollag to have been also made on 26 June 1989. It is in the form of the schedule to that agreement. Clause 1 of the agreement states:
"At the request of (Lindsey) (Dallhold Estates) hereby agrees that
upon receipt of notice from (Lindsey) or the happening of any Event
of Default as defined in (the legal charge of even date made between
Lindsey and Figurehead Finance Limited) it will forthwith thereupon
surrender all its estate interest and rights in the demised premises
to (Lindsey) by executing and delivering to (Lindsey) a deed
(hereinafter referred to as 'the Surrender Deed') in the form annexed
hereto and by delivering up vacant possession of the demised premises
and delivering the Lease and the keys of the demised premises to
(Lindsey) to the intent that the Term shall merge and be extinguished
in the reversion immediately expectant upon the Term and within one
month of the date hereof (Dallhold Estates) shall deposit the
Surrender Deed sealed by (Dallhold Estates) with the Solicitors to
Figurehead to be held in escrow by such solicitors and (Dallhold
Estates) shall authorise such solicitors to date and to deliver the
same to Figurehead upon the happening of any of the said Events of
Default."
Advice received by Mr Gumbley from senior and junior counsel of the English Bar with particular expertise in the law relating to agricultural holdings is that if these arrangements are to be construed as conferring an option, then the option is void as lacking the specification of a perpetuity period. Further, it appears that Dallhold Estates had no independent representation in connection with the drawing of these documents. They were drafted by Lindsey's solicitors, with Mr Bollag playing a large part in the affair. Counsel are of the view that it is arguable that an agreement of this nature would not be enforced against a tenant, particularly where the obligation was to surrender at an uncertain future date. In addition, on the face of the agreement, Lindsey itself might trigger an event of default under the terms of the Figurehead charge, thereby enabling Lindsey to enliven the mechanism requiring the surrender by Dallhold Estates. Counsel has advised that it is a well established principle that an agreement between a landlord and a third party to bring about the demise of a tenancy otherwise having the security given by provisions of the Agricultural Holdings Act will be set aside, and those rights preserved.
On 9 October 1991, notice to quit the Estate on 30 July 1993 was given to Dallhold Estates by Lindsey. The notice was given for the reason stated in Case D of Schedule 3, Part 1 of the Agricultural Holdings Act, namely that at the date of the giving of the notice Dallhold Estates had failed to comply with a written notice dated 7 August 1991 and served on it by Lindsey which required it within two months of service to pay rent due in respect of the holding, viz. pounds 62,500.
The existence of the notice was not brought to the attention of Mr Gumbley or any person acting on his behalf. The result is that the sums demanded in the notice to pay were not paid. Counsel advises that the consequence is that if the notice to pay was valid Lindsey was entitled to serve the notice to quit, which will determine the lease on 30 July 1993.
On the other hand, if the notice to pay can be shown to have been defective, the notice to quit will be of no effect. Counsel advises that there are grounds upon which the notice to quit may be invalid, particularly because of a failure on the part of Lindsey to comply with the requirement as to the furnishing of an address in England and Wales at which notices may be served on the landlord by the tenant: sub-s. 48 (1) of the Landlord and Tenant Act 1987 (U.K.).
Further, on 29 and 30 July 1991, the solicitors for Lindsey served notices to quit on Dallhold Estates relying upon grounds set out in s. 27 of the Agricultural Holdings Act. Counter-notices were served with a view to preserving the position of Dallhold Estates. An application was made by Lindsey to the Agricultural Lands Tribunal in relation to these notices, but at the hearing before me there was a dispute, not resolved on the evidence, as to whether that application had since been withdrawn by Lindsey.
There is an additional complication. Miss Susanne Bond is the daughter of Mr Alan Bond. She has resided on the Estate since 1986. Her solicitors assert that on numerous occasions she was assured by directors of Dallhold Estates that the property is hers to occupy as her home for so long as she wishes. They further contend that in reliance upon those assurances and representations, their client has expended moneys upon the maintenance, upkeep and development of the property with the result that "our client may very well be entitled by virtue of a proprietary estoppel or constructive trust to a life interest". They also assert that Miss Bond would have the benefit of certain statutory rights conferred by the Rent (Agriculture) Act 1976 (U.K.) and the Protection from Eviction Act 1977 (U.K.). The evidence before me indicates that even if Miss Bond could substantiate these claims, the interest of Dallhold Estates would still have a value in the range of pounds 300,000 to pounds 350,000. Further, the claims of Miss Bond, if substantiated, would appear to entitle her at best to some interest in the main residence and in the stables, not in the Estate as a whole.
To his report dated 1 November 1991, Mr Gumbley annexes an estimated statement of affairs which he has prepared on two bases. The first is that Dallhold Estates is not wound up pending the sale of the leasehold interest, the second is on the footing that a winding-up order is made before any sale has been effected. Upon the first hypothesis, the rental arrears would be paid to Lindsey in full. Upon the second, these moneys would be included with the other claims of unsecured creditors. Upon the first basis, the estimated dividend to unsecured creditors, that is to say, Dallhold Investments ( 1,059,581) Mr Bollag pounds (373,176) and trade creditors (now pound40,582) would be 89%. Upon the other hypothesis, with the inclusion of the rental arrears, the estimated dividend would be 12%.
Counsel for Lindsey and Mr Bollag directed various criticisms to these estimates and other portions of the evidence but, even if various revisions are made, the disparity between the two rates of dividend remains considerable. Mr Gumbley's conclusion is expressed as follows:
"The continuance of the provisional liquidation appears to me to
depend upon the view the Court will take of the balance between the
benefit of a certain dividend to creditors if an early winding up
Order is made, and the less certain but very substantially improved
dividend available to creditors if a sale of the lease can be made
while the winding up petitions in Australia and England stand adjourned."
It will apparent from the sums involved that the principal creditor by far is Dallhold Investments. The liquidator of Dallhold Investments urges upon the Court the advice his Sydney solicitors have received from London solicitors, Messrs Nabarro Nathanson, set out in a letter from that firm dated 4 November 1991. They refer to the provisions of Part II of the Insolvency Act, headed "Administration Orders". During the period for which an administration order is in force, no order may be made for the winding-up of the company in question. In Australia, neither the Bankruptcy Act 1966 nor the Law contain provisions analogous to those of Part II of the Insolvency Act, although the adoption of such measures has been under consideration by the Australian Law Reform Commission; see ALRC 45 "General Insolvency Inquiry", Vol. 1, section 99.
Whilst an administration order was in force, not only might Dallhold Estates not be wound up, but no security over its property might be enforced without the consent of the administrator or leave of the court, and no other proceedings, execution or other legal process might be commenced or continued against Dallhold Estates and its property without the consent of the administrator or leave of the court.

I accept the submissions by Dallhold Investments as principal creditor in Dallhold Estates that such an administration offers the possibility that the value of the lease may be preserved for the benefit of the creditors as a whole of Dallhold Estates, whilst at this stage the making of a winding-up order either here or in England plainly would not do so. The preservation and realisation of the value of the lease is dependent upon a number of matters. These would need to be resolved in an administration. They include, as appears from what I have said earlier in these reasons, the issues dealing with (i) the interest claimed by Miss Susanne Bond, (ii) the effect of the deed of surrender and the involvement of the Figurehead charge and Anglo Irish, and (iii) the effect of the notice to quit served by Lindsey.
Messrs Nabarro Nathanson have advised that there are significant doubts as to whether an administration order may be made in respect of Dallhold Estates, except at the request of this Court under the reciprocal arrangements which I have earlier mentioned.
I have reached the conclusion that it is desirable that the best possible realisation of the assets of Dallhold Estates be achieved for the benefit of all its unsecured creditors. I will make a declaration that it is desirable to request the assistance of the English Courts. That assistance may be provided by the making of an administration order, if the English Court having charge of the matter thinks it fit to so order, or by the making of such further order or other order as it may consider appropriate. I will order that a Letter of Request issue accordingly. The procedures involved require communications between governments and may take some time. It would be unfortunate if during the pendency of those procedures there was any change in the status quo in the English proceedings.
The appropriate form of the Letter of Request may be settled by the District Registrar, with leave to refer the matter to me if any difficulty arises. The appropriate procedures to be followed in transmission of the letter of request appears from Hardie Rubber Company Pty Ltd v General Tire and Rubber Company (1973) 129 CLR 521 at 525. And see generally, Parsons v Martin (1984) 5 FCR 235; Pearce v Button (1985) 8 FCR 40; Elna Australia Pty Ltd v International Computer (Aust.) Pty Ltd (1987) 14 FCR 461.
I will hear counsel on the question of costs of the application which has led to the making of these orders.
In the meantime, the application by Lindsey and Mr Bollag for substitution and for winding-up forthwith is stood over for a period which I will fix after inviting further submissions.

[1991] FCA 741

27 NOVEMBER 1991