Grocon Constructors Pty Ltd v Kimberley Securities Ltd - [2009] NSWSC 541

Reported Decision:
72 ACSR 305

New South Wales

Supreme Court

CITATION: Grocon Constructors Pty Ltd v Kimberley Securities Ltd [2009] NSWSC 541
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 04/05/09, 05/05/09, 06/05/09

JUDGMENT DATE :
16 June 2009

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Orders to be made setting aside resolution of creditors, terminating deed of company arrangement and for winding up of company.

CATCHWORDS: CORPORATIONS - voluntary administration - deeds of company arrangement - creditor seeks orders setting aside resolution for execution of deed of company arrangement and terminating deed - various aspects of s 600A discussed - all positive votes were votes of related creditors, company officers or nominees holding debts purchased and paid for by director related entity - aspects of prejudice to non-assenting creditors discussed - fertile ground for examination of possible related party recoveries by liquidator

LEGISLATION CITED: Corporations Act 2001 (Cth), Part 5.3A, ss 9, 445D, 447A, 600A

CATEGORY: Principal judgment

CASES CITED: Bell Group Ltd v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 70 ACSR 1
Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510
Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 34 ACSR 391
Deputy Commissioner of Taxation v Wellnora Pty Ltd (2007) 163 FCR 232; [2007] FCA 1234
Deputy Commissioner of Taxation v Woodings (1995) 16 ACSR 266
Earl of Chesterfield v Janssen (1750) 2 Ves Sen 125; 28 ER 82
Re Paradise Constructors Pty Ltd [2004] VSC 92; (2004) 8 VR 171
Wood v Laser Holdings Ltd (1996) 19 ACSR 245

PARTIES: Grocon Constructors Pty Limited - Plaintiff
Kimberley Securities Limited - First Defendant
John Vouris - Second Defendant
Warren Pantzer - Third Defendant
Lohemi Pty Limited - Fourth Defendant
Gabriel Michael Lorentz - Fifth Defendant
Nathan Stoliar - Sixth Defendant
Building Insurers' Guarantee Corporation - Supporting Creditor

FILE NUMBER(S): SC 2199/09

COUNSEL: Mr J B Simpkins SC/Mr D P Manly - Plaintiff
Mr F C Corsaro/Mr F G Kalyk - First, Fourth, Fifth and Sixth Defendants
Ms E A Collins - Second and Third Defendants
Mr L P Geary, Solicitor - Supporting Creditor

SOLICITORS: Cosoff Cudmore Knox - Plaintiff
Osborne & Associates - First, Fourth, Fifth and Sixth Defendants
Addisons - Second and Third Defendants
Mills Oakey Lawyers - Supporting Creditor

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 16 JUNE 2009

2199/09 GROCON CONSTRUCTORS PTY LIMITED v KIMBERLEY SECURITIES LIMITED (ADMINISTRATORS APPOINTED)

JUDGMENT

Proceedings and parties

1 The plaintiff (“Grocon”) attacks a deed of company arrangement dated 21 April 2009 executed by the first defendant (“Kimberley”). The attack is resisted by Kimberley and also by the five other parties to the deed of company arrangement who are the remaining defendants – Mr Vouris and Mr Pantzer (the deed administrators), Lohemi Pty Ltd 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.

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Details

Case: [2009] NSWSC 541
Decision Date: 16 June 2009

CaseChat Overview and Summary

In this case, the plaintiff, Grocon Constructors Pty Ltd, sought orders to set aside a resolution for the execution of a deed of company arrangement by Kimberley Securities Ltd. The plaintiff also sought to terminate the deed, claiming that the resolution was unfairly prejudicial to the company and its non-assenting creditors. The dispute was heard in the Supreme Court of New South Wales, Equity Division.

The central legal issues before the court were whether the resolution for the execution of the deed of company arrangement was unfair to non-assenting creditors and whether the votes of related creditors, company officers, or nominees holding debts purchased and paid for by a director's related entity were valid. The court had to consider the application of section 600A of the Corporations Act 2001 (Cth) in relation to these issues. The court was also required to examine the circumstances in which a creditor's vote could be considered invalid due to related party transactions.

The court held that the resolution for the execution of the deed of company arrangement was indeed unfair to non-assenting creditors. The court found that all positive votes were those of related creditors, company officers, or nominees holding debts purchased and paid for by a director's related entity. The court held that these votes should not have been counted, as they constituted an unfair preference to those creditors. The court also noted that the situation presented fertile ground for the examination of possible related party recoveries by the liquidator. Consequently, the court set aside the resolution and terminated the deed of company arrangement.

The court ordered that the resolution for the execution of the deed of company arrangement be set aside and the deed be terminated. The court also directed that the company be placed into liquidation and appointed a liquidator to manage the process. The court further ordered that the related party recoveries be examined and appropriate action be taken to ensure fairness to all creditors.

Orders