Grundy Organisation Pty Ltd - [2010] NSWSC 1432

CITATION: Grundy Organisation Pty Ltd [2010] NSWSC 1432

HEARING DATE(S): 09/12/10

JUDGMENT DATE :
9 December 2010

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

EX TEMPORE JUDGMENT DATE: 9 December 2010

DECISION: Curative orders made.

CATCHWORDS: CORPORATIONS - members voluntary winding up - special resolution for winding up passed with notice of less than 21 days - both members assented - liquidator later resigned - directors purported to pay dividend to holding company - irregular for company in liquidation to do so - but funds reached destination consistent with due progress of winding up - no injustice - curative orders made

LEGISLATION CITED: Corporations Act 2001 (Cth), ss 495(2), 495(3), 1322(4), 1322(6)(a)(i), 1322(6)(a)(ii), 1322(6)(a)(iii), 1322(6)(c)
Corporations Law, ss 491(1), 249H(2)(b).

CATEGORY: Principal judgment

PARTIES: Martin John Green and Peter Paul Krejci as liquidators of Grundy Organization Pty Ltd - Plaintiffs

FILE NUMBER(S): SC 2010/405621

COUNSEL: Mr C N Bova - Plaintiffs

SOLICITORS: Holding Redlich - Plaintiffs

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

BARRETT J

THURSDAY 9 DECEMBER 2010

2010/405621 MARTIN JOHN GREEN & ANOR AS LIQUIDATORS OF GRUNDY ORGANISATION PTY LTD

JUDGMENT

1 Mr Green and Mr Krejci are the liquidators of Grundy Organisation Pty Ltd (“Grundy”) or, at least, there was a purported appointment of them as liquidators in March 2010.

2 I say that there was a purported appointment because the application they now make is one that concerns, in part, irregularity attending action taken in 1998 to cause Grundy to become subject to members voluntary winding up under the Corporations Law.

3 Application is made under s 1322(4) of the Corporations Act 2001 (Cth) for curative orders in respect of that irregularity. There is a like application in respect of another irregularity to be mentioned presently.

4 As at December 1998, Grundy had two members, each of whom held one share. They were Fremantle Australia Holdings Pty Limited (“Fremantle”) and Ms Pecotic. She held her one share upon trust for Fremantle.

5 On 18 December 1998 there was a purported meeting of the members of Grundy at which it was purportedly resolved by way of special resolution that the company be wound up voluntarily. Notice of at least 21 days was not given. Accordingly, the resolution could not be a special resolution as required by s 491(1) of the Corporations Law unless members with at least 95 per cent of the votes that could be cast at the meeting had agreed to some shorter period of notice: Corporations Law, s 249H(2)(b).

6 Agreement to short notice was signified by Fremantle by an instrument executed under its seal. Ms Pecotic was one of the persons who signed in connection with the affixing of that seal. She did not, however, herself as a shareholder signify agreement of the kind contemplated by s 249H(2)(b), with the result that that section did not operate.

7 The evidence makes it clear, however, that Ms Pecotic attended and was present at the meeting of…

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

AGLC: Grundy Organisation Pty Ltd [2010] NSWSC 1432
Case: [2010] NSWSC 1432
Decision Date: 9 December 2010

CaseChat Overview and Summary

Grundy Organisation Pty Ltd was the subject of a members' voluntary winding up. The dispute arose when the liquidator resigned and the directors sought to pay a dividend to the holding company, Grundy Organisation Pty Ltd. This matter was heard in the Supreme Court of New South Wales. The central legal issue for the court was whether the directors could lawfully pay a dividend to the holding company when the winding up process was irregular due to insufficient notice being provided to members before the special resolution for winding up was passed.

The court considered the statutory requirements for a members' voluntary winding up and the implications of the irregularity caused by the inadequate notice. It found that while the winding up was irregular, the funds had reached their intended destination, and no injustice had occurred. The court held that despite the irregularity, the actions taken by the directors were consistent with the due progress of the winding up. Therefore, the court exercised its inherent jurisdiction to make curative orders to regularise the proceedings.

The Supreme Court of New South Wales granted the curative orders sought by the directors, thereby regularising the winding up process and allowing the dividend payment to the holding company. This decision recognised the practical reality of the situation, where the funds had already reached their intended destination, and no injustice had resulted from the irregularity in the winding up process.

Orders