Forest Marsh Pty Ltd v Pleash

Case [2011] FCA 134

FEDERAL COURT OF AUSTRALIA

Forest Marsh Pty Ltd v Pleash [2011] FCA 134

Citation: Forest Marsh Pty Ltd v Pleash [2011] FCA 134
Parties: FOREST MARSH PTY LTD (ACN 009 545 733) and STEPHEN MICHAEL POWELL v BLAIR PLEASH and BIBBY FINANCIAL SERVICES AUSTRALIA PTY LIMITED (ACN 101 657 041)
File number: NSD 1328 of 2009
Judge: YATES J
Date of judgment: 23 February 2011
Catchwords:

CORPORATIONS – application to remove receiver and manager – appointment pursuant to charge – alleged breaches of statutory duties – alleged breach of general law duties - alleged breach of duty to act in good faith – alleged breach of duty to terminate receivership – discussion of duties of receiver to chargor – discussion of content of receiver’s duty to terminate receivership – whether breaches made out on facts relied on

CORPORATIONS – application for inquiry into receiver’s conduct – alleged improper conduct in continuing receivership – whether inquiry would be ordered when grounds for inquiry have been fully litigated

CONSUMER LAW – consumer protection – misleading or deceptive conduct in relation to payout amount – initial failure to notify of contingent claim – consideration of what constitutes relevant conduct – trifling, ephemeral and inconsequential conduct

COSTS – indemnity costs – adjournment of hearing to replead case
Legislation: Corporations Act 2001 (Cth) s 180, s 181, s 182, s 423
Competition and Consumer Act 2010 (Cth) Sch 2 s 18
Cases cited: Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd (2006) 64 ATR 524
Bank of New South Wales v Federal Commissioner of Taxation (1979) 145 CLR 438
Bowesco Pty Ltd v Cronin (2008) 223 FLR 21
Expo International Pty Ltd (Receivers and Managers Appointed) (In Liquidation) v Chant [1979] 2 NSWLR 820
Re S & D International Pty Ltd (In Liquidation) (Receivers and Managers Appointed) v MIG Property Services Pty Ltd [2009] VSC 225
Date of hearing: 29 July 2010, 23-24 August 2010
Date of last submissions: 24 August 2010
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 143
Counsel for the Applicants: Mr S Cairns
Solicitor for the Applicants: Bradfields
Counsel for the Respondents: Mr R Glasson
Solicitor for the Respondents: ERA Legal

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1328 of 2009
BETWEEN:

FOREST MARSH PTY LTD (ACN 009 545 733)
First Applicant

STEPHEN MICHAEL POWELL
Second Applicant
AND:

BLAIR PLEASH
First Respondent

BIBBY FINANCIAL SERVICES AUSTRALIA PTY LIMITED (ACN 101 657 041)
Second Respondent

JUDGE:

YATES J

DATE OF ORDER:

23 FEBRUARY 2011

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

  1. The application be dismissed.

  2. The second applicant pay, on an indemnity basis, the respondents’ costs thrown away by the adjournment granted on 29 July 2010.

  3. Subject to the order made in paragraph 2, the applicants pay the respondents’ costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the…

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AGLC
Forest Marsh Pty Ltd v Pleash [2011] FCA 134
Case
[2011] FCA 134
Decision Date

CaseChat Overview and Summary

Forest Marsh Pty Ltd and Forest Investments Pty Ltd sought to remove the first respondent, who was acting as receiver and manager of the applicants, pursuant to a mortgage charge. The applicants alleged breaches of statutory duties under the Corporations Act 2001 (Cth), as well as breaches of general law duties and duties to act in good faith. The applicants also sought an inquiry into the conduct of the first respondent in continuing the receivership. The applicants alleged that the first respondent failed to notify them of a contingent claim, which they considered misleading or deceptive conduct under the Australian Consumer Law. The second applicant, who was a director of the first applicant, also sought to be removed from the first respondent's position.

The primary legal issues were whether the first respondent breached their statutory duties, general law duties, and duty to act in good faith, and whether an inquiry into the conduct of the first respondent should be ordered. The court had to determine whether the first respondent breached their duty to terminate the receivership and whether the failure to notify the applicants of the contingent claim constituted misleading or deceptive conduct.

The court found that the first respondent did not breach their statutory duties, general law duties, or duty to act in good faith. The court held that the first respondent had a duty to terminate the receivership when the debt had been paid, but this did not mean that the receivership had to be terminated immediately. The court also found that the failure to notify the applicants of the contingent claim was trifling, ephemeral, and inconsequential, and did not constitute misleading or deceptive conduct. The court held that an inquiry into the conduct of the first respondent would not be ordered, as the grounds for the inquiry had already been fully litigated.

The application was dismissed, and the second applicant was ordered to pay the respondents' costs on an indemnity basis. The applicants were ordered to pay the respondents' costs, subject to the order made in relation to the second applicant.

Orders

Orders of the court

1.

The application be dismissed.

2.

The second applicant pay, on an indemnity basis, the respondents’ costs thrown away by the adjournment granted on 29 July 2010.

3.

Subject to the order made in paragraph 2, the applicants pay the respondents’ costs.

Note:

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Section 180 provides as follows:Care and diligence—directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a)were a director or officer of a corporation in the corporation's circumstances; and (b)occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Business judgment rule (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a)make the judgment in good faith for a proper purpose; and (b)do not have a material personal interest in the subject matter of the judgment; and (c)inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d)rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. (3) In this section: business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation. Section 181 provides as follows:Good faith—directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties: (a)in good faith in the best interests of the corporation; and (b)for a proper purpose. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Section 182 provides as follows:Use of position—directors, other officers and employees (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a)gain an advantage for themselves or someone else; or (b)cause detriment to the corporation. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. It may readily be accepted that, as an “officer” of the first applicant (see s 9 of the Corporations Act), the first respondent owed the duties imposed in ss 180, 181 and 182. The applicants also allege that the first respondent owed the first applicant certain general law duties, which they defined in paragraph 13 of the amended statement of claim as follows: (a)“a duty to pay over to the second Respondent the amount secured by the mortgage, and to pay over, or surrender, to the mortgagors [sic] any surplus money or other assets”;(b)“to exercise his powers in good faith and for a proper purpose, including the duty not to sacrifice the mortgagor’s interests recklessly”;(c)“a duty to act strictly within, and in accordance with, the conditions of his appointment”;(d)“to account to the mortgagor after the mortgagee [sic] security has been discharged, not only the surplus money or other assets, but also for his conduct of the receivership”;(e)“a duty to terminate the receivership by handing over the money and other surplus assets to the mortgagor as soon as the debt of the mortgagee has been paid”.[Capitalisation in original]

Ratio Decidendi

Legal Principle Established

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