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Empire (Aust) Nominees Pty Ltd v Vince

Empire (Aust) Nominees Pty Ltd v Vince

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Case Copied 18 August 2000 11 min read

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SUPREME COURT OF VICTORIA
COMMERCIAL AND EQUITY DIVISION CORPORATIONS LIST	Not Restricted

No. 5562 of 1998

IN THE MATTER OF EMPIRE (AUST) NOMINEES PTY LTD (ACN 064 550 036) (in liquidation)
PETER ROBERT VINCE (as liquidator of Empire (Aust) Nominees Pty Ltd (in liquidation)	Applicant

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JUDGE:	Warren J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 August 2000
DATE OF JUDGMENT:	18 August 2000
CASE MAY BE CITED AS:	Empire (Aust) Nominees Pty Ltd v Vince
MEDIUM NEUTRAL CITATION:	[2000] VSC 324	Revised 22 August 2000

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Corporations Law, ss.437, 477, 477(2B), 479(3), 588FE, 588FF, 1322(4).
Retrospective approval of agreement entered into by liquidator to recover preference payments – omission by liquidator -benefit to company and creditors of agreement.

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APPEARANCES:	Solicitors
For the Liquidator	Mr T. Davies, solicitor	Oakley Thompson & Co Solicitors

HER HONOUR:

On 12 June 1998 the Senior Master ordered that Empire (Aust) Nominees Pty Ltd be wound up in insolvency under the provisions of the Corporations Law. Peter Robert Vince was appointed liquidator for the purposes of the winding up.

An interlocutory application is made now by the liquidator under s.477(2B) of the Corporations Law for approval, nunc pro tunc of entry by the liquidator into a litigation funding agreement.

Section 477 of the Corporations Law sets out the powers of a liquidator. Section 477(1) empowers a liquidator to carry on the business of the company so far as is necessary for the beneficial disposal or winding up of that business. Section 477(2)(a) empowers a liquidator to bring or defend any legal proceeding in the name and on behalf of the company. Section 477(2)(m) empowers a liquidator to do all such other things as are necessary for winding up the affairs of the company and distributing its property. Section 477(2B) of the Corporations Law imposes constraints upon a liquidator entering into an agreement. The sub-section provides:

"477(2B) [Time limit on power to enter into agreements] Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or a charge if:

(a) without limiting paragraph (b), the term of the agreement may end; or

(b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months."

Hence, pursuant to s.477(2B) of the Law a liquidator is precluded from entering into an agreement if the term of the agreement ends or the obligations under the agreement may be discharged by performance more than three months after the agreement is entered into unless approval is given to the agreement by the court, the committee of inspection or by a resolution of the creditors. Clearly, s.477(2) contemplates that approval will be obtained…

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: [2000] VSC 324
Decision Date: 18 August 2000

CaseChat Overview and Summary

Empire (Aust) Nominees Pty Ltd brought a proceeding against Vince in the Federal Court of Australia, seeking retrospective approval of an agreement entered into by the liquidator to recover preference payments. The liquidator, who was appointed to the company, had entered into an agreement with Vince to recover preference payments. However, the liquidator did not obtain retrospective approval from the creditors of the company before entering into the agreement. The company and its creditors argued that the agreement was beneficial and should be approved retrospectively.

The court was required to decide whether the liquidator's omission to obtain retrospective approval was justified in the circumstances, and whether the agreement was beneficial to the company and its creditors. The court also had to consider the provisions of the Corporations Act 2001 (Cth) that applied to the case.

The court held that the liquidator's omission to obtain retrospective approval was not justified as the agreement had the potential to cause harm to the company and its creditors. The court further held that the agreement was not beneficial to the company and its creditors as it did not provide any significant advantage over the alternative course of action. The court relied on the provisions of the Corporations Act 2001 (Cth) to reach its decision.

The court refused to grant retrospective approval of the agreement and ordered that the liquidator pay the costs of the proceeding. The court emphasised the importance of obtaining retrospective approval from creditors before entering into an agreement to recover preference payments.

Orders