Franbridge P/L v Societe & Generale Finance Corporation P/L - [1994] FCA 514

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JUDGMENT NO. .., d l.

Betveen X - Applicant

And r

03 AUG 1994

Respondents

The receiver of a company in provisional liquidation, Franbridge Pty Limited, has brought before the Court an application for directions under section 424(1) of the Corporations Law. The principal direction sought was that he, as receiver, is justified in selling the business and assets of Franbridge to a company called Staffecho Pty Limited in accordance with a deed which has been tendered and marked exhibit Al. The receiver was appointed pursuant to a mortgage in favour of a company called Societ6 and Generale Finance Corporation Pty Limited. All three companies, Societ6 and Generale, -Franbridge and Staffecho, are associated in the sense that they are not at arm's length.

a sum whih will effectively pay out the mortgagee but it will leave little or nothing for the unsecured creditors who are owed
several hundred thousand dollars. However, the arrangements for the sale leave the trade debtors of Franbridge in the hands of the receiver and there is evidence before the Court suggestive that the bringing in of these debts may realise a sum which is large enough to pay out the unsecured creditors.
The came is a strange one in that although the liquidator has been given leave to appear in the proceedings, in effect as the representative of the unsecured creditors, and has announced through counsel that he opposes the deed, little has been drawn to the attention of the Court that would suggest that the deed and the proposed sale embodied in it are not reasonable and proper. The liquidator's point of view is based upon a series of intangible suspicions or doubts, or is perhaps a request for time to have examined on oath, under the Corporations Law, the relevant principals of the companies so that the genuineness and propriety of the proposed sale can be inveetigated. Those permons have been sumnronsed to be examined but their examinations have been delayed by a challenge to the procedure adopted which

a month. Thus the liquidator says in effect that he is not able is to be considered by a Full Court on reference from me in about
to put before the Court at this time any substantial or substantive reason suggestive that the receiver has not acted honourably, reasonably and appropriately in relation to the sale, but that there are circumstances surrounding the sale, mostly based upon the inter-relationship between the companies and their directors, as to cause the Court to pause before giving any actual or apparent approval to the sale.
In fact, the receiver is not pressing today for an overt approval of the sale. The direction that he actually seeks is that the male by the applicant to Staffecho of the business of Franbridge would not be improper merely because

There is no challenge to the mortgage nor to the appointment of the receiver. The deed provides for the sale of the business for

(a) a related company,…

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 Franbridge P/L v Societe & Generale Finance Corporation P/L

Details

AGLC: Franbridge P/L v Societe & Generale Finance Corporation P/L [1994] FCA 514
Case: [1994] FCA 514
Decision Date: 22 Jun 1994

CaseChat Overview and Summary

Franbridge Pty Limited, through its receiver, has applied to the Court for directions under section 424(1) of the Corporations Law, seeking approval to sell the company's business and assets to Staffecho Pty Limited, a company associated with the mortgagee, Societe Generale Finance Corporation Pty Limited. The application also seeks a declaration under section 420A(1) that the receiver has acted reasonably in respect of the sale. The liquidator of Franbridge, representing the unsecured creditors, opposes the sale but has not presented any substantive reasons or evidence to challenge the receiver's actions.

The primary legal issues before the Court are whether the receiver is justified in selling the business to Staffecho and whether the receiver has acted reasonably and with reasonable care in obtaining the best price reasonably obtainable for the sale. The Court must also consider the implications of making a declaration under section 420A(1) in the context of the evidence presented.

The Court found that the receiver had acted reasonably and with reasonable care in obtaining the best price reasonably obtainable for the sale. The receiver had advertised the business widely and had received an offer from Staffecho that would repay the mortgagee. Although the sale would leave little for the unsecured creditors, the receiver believed it was the best option available. The Court acknowledged the potential for future challenges to the sale but noted that, on the evidence presented, there was no reason to believe the sale was improper or unreasonable. However, the Court declined to give the directions or make the declaration sought by the receiver. It found that the Court should not intervene in commercial decisions or make declarations in ex parte proceedings without adversarial testing of the evidence. The Court also expressed reluctance to give advisory opinions or make declarations that might mislead the public into believing the Court had given proper judicial consideration to the matter. Instead, the Court dismissed the application, leaving the sale to proceed but without the Court's formal approval.

Orders