El-Saafin v Franek (No 3) - [2019] VSC 155

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST

S CI 2018 01685

HASSAN EL-SAAFIN	First Plaintiff
MOHAMAD EL-SAAFIN	Second Plaintiff
v
MARK FRANEK and others according to the Schedule	Defendants

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JUDGE:	LYONS J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 January and 14 February 2019
DATE OF RULING:	15 March 2019
CASE MAY BE CITED AS:	El-Saafin & Anor v Franek & Ors (No 3)
MEDIUM NEUTRAL CITATION:	[2019] VSC 155

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CORPORATIONS – External administration – Second meeting of creditors - Appeal from person presiding’s decision to admit or reject proofs of debt - Section 75-100(4) of the Insolvency Practice Rules (Corporations) 2016 – Nature of appeal – Where debts or claims the subject of legal proceedings – Relief to be ordered where resolution to place company into liquidation would not have passed

CORPORATIONS – External administration – Second meeting of creditors – Whether external administrator or person presiding at meeting must ask creditor to give evidence in writing in relation to a debt claimed – Meaning of ‘if necessary’ - Section 75-95 of the Insolvency Practice Rules (Corporations) 2016

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr I Upjohn QC with Mr B Mason	Hicks Oakley Chessell Williams
For the First and Fourth Defendants	Mr J Evans QC with Mr P Miller	Mark J Halse
For the Second and Third Defendants	–	Capstone Koroneos Legal
For the Fifth and Sixth Defendants	Dr A Trichardt	Charles Fice Solicitors
For the Liquidators of Saafin Constructions Pty Ltd (receivers and managers appointed) (in liquidation)	Mr E Moon	Thomas Egan & Associates

HIS HONOUR:

Introduction and Summary

In this proceeding, I have already delivered two interlocutory judgments.[1] For convenience, in these reasons, I will adopt the terms defined in them.
[1] El-Saafin & Anor v Franek & Ors [2018] VSC 450 (‘Reasons No 1’) and El-Saafin & Anor v Franek & Ors (No 2) [2018] VSC 683 (‘Reasons No 2’).

In this application, the plaintiffs appeal against certain decisions of Mr Ivan Glavas when presiding at the second meeting of the creditors of the Company held pursuant to s 439A of the Corporations Act 2001 (Cth) (the ‘Act’) on 12 November 2018 (the ‘12 November meeting’). At that meeting, the creditors whose proofs of debt were admitted by Mr Glavas voted by value, but not by number, to place the Company into liquidation. As a result, Mr Glavas used his casting vote to resolve to place the Company into liquidation.

The plaintiffs appeal against Mr Glavas’ decisions:

(1) to reject the 7 proofs of debt of Ramahi, Ibaida, Wael El-Saafin, El-Daouk, Nasser, Abou-Eid and Bakhtiyar and to reject part of the proofs of debt of each of Drs Atalla and Hegazy (collectively, the ‘rejected proofs’); and

(2) to admit 3 proofs of debt of Mekkya, MAG and Mr Ibrahim (collectively, the ‘challenged proofs’).

In the amended summons filed on 10 December 2018, the plaintiffs also sought an order…

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: [2019] VSC 155
Decision Date: 15 March 2019

CaseChat Overview and Summary

In El-Saafin v Franek (No 3), the case involved the appeal of a decision made by the person presiding over a second meeting of creditors. The external administrator had decided whether to admit or reject proofs of debt. The appeal was lodged under section 75-100(4) of the Insolvency Practice Rules (Corporations) 2016. The primary issue before the court was whether the appeal was validly made and whether relief should be granted when the resolution to place the company into liquidation would not have passed if the legal proceedings regarding the debts or claims had been considered.

The court examined the legal framework to determine the validity of the appeal and the appropriate relief. It assessed the role of the external administrator and the person presiding at the meeting regarding creditors providing evidence in writing about debts claimed. Specifically, the court interpreted the phrase "if necessary" from section 75-95 of the Insolvency Practice Rules (Corporations) 2016. The court concluded that the external administrator or the person presiding at the meeting should ask creditors to provide evidence in writing only if it was necessary for the resolution of the meeting.

The court found that the appeal was validly made and that relief should be granted in this instance. It held that the external administrator or the person presiding at the meeting must ask creditors to give evidence in writing if necessary, thereby clarifying the procedural requirements for the administration of debts in external administration. The court's decision provided guidance on the interpretation and application of the relevant insolvency practice rules, ensuring clarity in the administration of creditors' meetings.

Orders