Legal Research
Cases
Florgale Uniforms Pty Ltd v Orders

Florgale Uniforms Pty Ltd v Orders

Case [2004] VSC 65 27 October 2004

Corporate Law & Governance

No judgment structure available for this case.

Type to search within this case.

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 2000 of 2000

FLORGALE UNIFORMS PTY LTD (ACN 004 233 167) (Receiver and Manager Appointed) (in liquidation) & Ors	Plaintiffs
v
MALCOLM JOHN ORDERS and NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937)	Defendants

---

JUDGE:	DODDS-STREETON J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	9-13, 16-19, 23-26 February, 1-5 and 10 March 2004
DATE OF JUDGMENT:	27 October 2004
CASE MAY BE CITED AS:	Florgale Uniforms Pty Ltd and Ors v Orders and National Australia Bank Limited
MEDIUM NEUTRAL CITATION:	[2004] VSC 65	Revised 18 November 2004

---

RECEIVERS AND MANAGERS – Duty of care in exercising power of sale – Sale of special purpose apparel and linen – Whether breach by auctioning stock rather than closing down sale to existing customer base –Whether breach in process by failure to compare and evaluate different methods of realisation - Whether failure appropriately to prepare stock for auction and adequately advertise auction – Whether breach by failing to accept favourable pre-auction offer for stock prior to its withdrawal – Corporations Law s.420A – Whether right of action conferred – Application to guarantors and ‘third-party’ mortgagors – Breach of duty not established.

Corporations Law s.420A; Corporations Law s.423; Corporations Law s.1234.

GE Capital Australia v Davis [2002] NSWSC 1146 ; Jeogla v ANZ [1999] NSWSC 563 ; Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114 ; Skinner v Jeogla (2001) 37 ACSR 106 ; Artistic Builders v Elliott & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16 ; Kyuss Express v Sellars (2001) 37 ACSR 62 ; Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P.W. Collinson with Ms C.M. Harris	O’Donnell, Frampton and Salzano
For the Defendants	Mr G.H. Garde Q.C. with Mr P. Fary	Russell Kennedy

TABLE OF CONTENTS

INTRODUCTION............................................................................................................................... 2

THE PARTIES...................................................................................................................................... 3

THE PARTIES’ CONTENTIONS...................................................................................................... 5

(a) Sale of Stock.............................................................................................................................. 5

The Plaintiffs’ Contentions........................................................................................................ 5
The Defendants’ Contentions.................................................................................................... 8

(b) The Yakka Offer..................................................................................................................... 11

FACTS AND EVIDENCE................................................................................................................. 12

PROPOSED SALE TO CUSTOMERS AT A DISCOUNT............................................................ 46

Valuation of Stock....................................................................................................................... 46

Proposed Sale to Customers...................................................................................................... 48

Evidence of John Burnes.......................................................................................................... 48
Customer Witnesses................................................................................................................. 53
Receiver’s Evidence.................................................................................................................. 59
Expert Evidence....................................................................................................................... 60
Conclusion............................................................................................................................... 63

APPROACH TO REALISATION OF ASSETS.............................................................................. 65

Evidence of Mr Wallace-Smith.................................................................................................. 65

Evidence of Mr McVeigh........................................................................................................... 65

Evidence of Mr Orders............................................................................................................... 67

RELEVANT LEGISLATION AND LEGAL PRINCIPLES.......................................................... 71

General Law Principles.............................................................................................................. 71

Section 420A – Position of Guarantors and Collateral Mortgagors..................................... 76

Market Value............................................................................................................................... 83

APPLICATION.................................................................................................................................. 96

Realisation of Stock..................................................................................................................... 96

The Auction.................................................................................................................................. 99

The Yakka Offer........................................................................................................................ 105

LIABILITY OF NAB........................................................................................................................ 109

COUNTERCLAIM.......................................................................................................................... 110

CONVERSION OF COMPUTER EQUIPMENT......................................................................... 111

CONCLUSION................................................................................................................................ 111

HER HONOUR:

INTRODUCTION

In this proceeding, certain corporations (now in liquidation), and the related companies and individuals who secured or guaranteed the payment of their liabilities to the National Australia Bank (“NAB”) pursuant to a number of debentures, seek relief against the NAB and…

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.

Continue reading Florgale Uniforms Pty Ltd v Orders

Details

AGLC: Florgale Uniforms Pty Ltd v Orders [2004] VSC 65
Case: [2004] VSC 65
Decision Date: 27 October 2004

CaseChat Overview and Summary

Florgale Uniforms Pty Ltd sought to establish a breach of duty by the receivers and managers, who had been appointed to realise the company's assets. The claim was grounded on the assertion that the receivers and managers breached their duty of care by auctioning the company's stock rather than pursuing a sale to the existing customer base. The dispute also included allegations regarding the process of realising the stock, such as the failure to compare and evaluate different methods of realisation, inadequate preparation of stock for auction, insufficient advertising of the auction, and the rejection of a favourable pre-auction offer. The case was heard in the Supreme Court of New South Wales.

The primary legal issues were whether the receivers and managers breached their duty of care and, if so, whether such a breach could confer a right of action under Corporations Law s.420A. The court also had to determine if the claim extended to guarantors and 'third-party' mortgagors. This involved examining whether the receivers and managers failed to adequately compare alternative methods of realisation, prepare the stock for auction, advertise the auction, and accept a favourable offer prior to auction. The court needed to assess if these actions constituted a breach of duty and if such a breach could give rise to a cause of action.

The court held that the receivers and managers did not breach their duty of care in the manner they exercised their power of sale. The court found that the receivers and managers had acted reasonably in deciding to auction the stock, given the circumstances and the need to realise assets quickly. The court also determined that there was no breach in failing to compare and evaluate alternative methods of realisation, as the auction was a reasonable and appropriate method under the circumstances. Additionally, the court found that the receivers and managers adequately prepared the stock for auction and provided sufficient advertising, and that the rejection of the pre-auction offer was not unreasonable. Consequently, the claim against the receivers and managers for breach of duty was dismissed. No right of action under Corporations Law s.420A was established, and the claim against the guarantors and 'third-party' mortgagors also failed.

The court dismissed the claim in its entirety, with each party bearing their own costs.

Orders