Grace v Grace (No 5) - [2013] NSWSC 601

Supreme Court

New South Wales

Medium Neutral Citation: Grace v Grace (No 5) [2013] NSWSC 601
Hearing dates: Tuesday 23 April 2013
Decision date: 24 April 2013
Jurisdiction: Equity Division
Before: Brereton J
Decision:
Termination of provisional liquidator and orders for inspection of liquidator's records

Catchwords:
CORPORATIONS - External administration - provisional liquidator - application to inspect books kept under s 531 Corporations Act - where statutory right to inspect books - whether request can be refused on grounds of oppression

CORPORATIONS - External administration - provisional liquidator - Application to terminate appointment of provisional liquidator - where no winding up order was made - where no winding up order will or can be made in substantive proceedings - whether
CORPORATIONS - External administration - provisional liquidator - application for judicial advice by provisional liquidator - whether provisional liquidator would be justified in entering into loan transactions and giving security over assets of the companies in order to pay fees and remuneration
Legislation Cited: (Cth) Corporations Act 2001, s 233 s 477(2B), s 531
(Cth) Corporations Regulations 2001, Reg 5.6.01, 5.6.02
Cases Cited: Garden Mews-St Leonards Pty Ltd v Butler-Pollnow Pty Ltd (No 4) (1984) 2 ACLC 682
Grace v Grace [2007] NSWSC 6
Grace v Grace (No 4) [2013] NSWSC 385
Re United Medical Protection [2003] NSWSC 1031
Category: Interlocutory applications
Parties: David Alexander Grace (plaintiff)
Deborah Sharon Grace (first defendant)
Julienne Grace (second defendant)
Nevilda Holdings Pty Ltd (prov liq'r appted) (third defendant)
Nevilda Investments Pty Ltd (prov liq'r appted) (fourth defendant)
Dutchie Pty Ltd (sixth defendant)
Phoenix Rising Investments Pty Ltd (seventh defendant)
Representation: Counsel:
Mr DL Williams SC w Mr SA Goodman (plaintiff)
Mr AR Moses SC w Mr DCP Stewart (first, second & seventh defendants)
Mr N Cotman SC (prov liq'r)
Solicitors:
James Tuite & Associates (plaintiff)
Clinch Long Letherbarrow Pty Ltd (first, second & seventh defendants)
Breene & Breene (prov liq'r)

File Number(s): 2006/ 259566

Judgment (ex tempore)

HIS HONOUR: On 28 March 2013 I dealt with the question of costs and dismissed the defendants' application for an inquiry as to damages pursuant to the usual undertaking given by the plaintiff in connection with his interlocutory application for the appointment of a provisional liquidator. I adjourned the proceedings to 23 April 2013 for directions "and any application by or in respect of the provisional liquidator" and directed that notice of any application to be made on 23 April be served on all other parties not later than 16 April. As a result, three applications were advanced before the Court on 23 April. The first was an interlocutory process filed by the first and second defendants on 15 April for an order that the provisional liquidator produce for inspection books and records kept by him pursuant to (Cth) Corporations Act 2001, s 531. The second was an interlocutory process filed by the plaintiff on 16 April 2013 for an order terminating the appointment of the provisional liquidator. The third was an interlocutory process, leave to…

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 Grace v Grace (No 5)

Details

AGLC: Grace v Grace (No 5) [2013] NSWSC 601
Case: [2013] NSWSC 601
Decision Date: 24 April 2013

CaseChat Overview and Summary

The matter before the court involved a dispute between Grace, a creditor of a company, and Grace, a provisional liquidator appointed to manage the company's affairs. The primary issue was whether the provisional liquidator could be compelled to inspect certain books under section 531 of the Corporations Act, and whether the creditor could terminate the liquidator's appointment without a winding up order. Additionally, the provisional liquidator sought judicial advice on whether it would be appropriate to enter into loan transactions and provide security over the company's assets to cover fees and remuneration.

The court addressed the statutory right of creditors to inspect books under section 531 of the Corporations Act, noting that the right is not absolute and can be subject to limitations. However, the court found that the grounds of oppression raised by the provisional liquidator did not provide a basis for refusing the inspection request. Regarding the termination of the liquidator's appointment, the court held that the creditor could not terminate the appointment without a winding up order, as the substantive proceedings had not resulted in such an order, and no order could be made in those proceedings.

In its reasoning, the court emphasised the importance of maintaining the independence and authority of provisional liquidators in managing a company's affairs during external administration. The court also highlighted the need for provisional liquidators to act in the best interests of the company and its creditors, including ensuring that their fees and remuneration are appropriately covered. The court concluded that the provisional liquidator would not be justified in entering into loan transactions and providing security over the company's assets without further consideration and approval, given the potential impact on the company's creditors and the need to avoid conflicts of interest.

The court made orders that the provisional liquidator must allow the inspection of the company's books, and that the creditor's application to terminate the liquidator's appointment was dismissed. The court also declined to provide the provisional liquidator with judicial advice on the proposed loan transactions and security over the company's assets, indicating that such matters required further consideration and appropriate legal advice.

Orders