Halton v Westminster Homes Pty Ltd

[2010] NSWSC 953

CITATION:	Halton v Westminster Homes Pty Ltd [2010] NSWSC 953
HEARING DATE(S):	25/08/10
JUDGMENT DATE :	25 August 2010
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	25 August 2010
DECISION:	Stand over part-heard proceedings to 1 November 2010.
CATCHWORDS:	CORPORATIONS – application under Corporations Act 2001 (Cth), s 444E for leave to proceed against defendant – where defendant subject to deed of company arrangement – whether plaintiff is person bound by deed of company arrangement – question of construction of deed of company arrangement – where separate proceedings on foot raise same issues as to construction of deed of company arrangement and include an application under s 447A to vary the operation of the deed – proceedings stood over until separate proceedings heard
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CATEGORY:	Procedural and other rulings
PARTIES:	Plaintiff: Adrian Halton Defendant: Westminster Homes Pty Ltd
FILE NUMBER(S):	SC 2009/322232
COUNSEL:	Plaintiff: Ms D M Bampton Defendant: Mr H K Insall SC
SOLICITORS:	Plaintiff: P J Donnellan & Co Defendant: Bannermans Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Wednesday, 25 August 2010

2009/322232 Adrian Halton v Westminster Homes Pty Ltd

JUDGMENT

1 HIS HONOUR: This is an application under s 444E(3) of the Corporations Act 2001 (Cth) for leave for the plaintiff to proceed with proceedings against the defendant in the Consumer, Trader and Tenancy Tribunal.

2 It is common ground that the defendant is subject to a deed of company arrangement. Subsection 444E(1) provides that until a deed of company arrangement terminates, s 444E applies to a person bound by the deed. Subsection (3) provides that the person cannot begin or proceed with a proceeding against the company or in relation to any of its property, or begin or proceed with enforcement process in relation to property of the company, except with the leave of the court and in accordance with such terms, if any, as the court imposes.

3 The first question on the application is whether the plaintiff is a person bound by the deed.

4 The defendant carried on and carries on business as a builder of residential homes. It is one of a group of companies in what has been called the Westminster Group.

5 On 10 August 2006 the plaintiff entered into a building contract with the defendant for the construction of a home and garage on land owned by the plaintiff in Blue Haven, New South Wales.

6 On 8 April 2008 the plaintiff commenced proceedings against the defendant in the Consumer, Trader and Tenancy Tribunal.

7 The dispute was described as "to finish off work and rending [sic] the whole house and driveway retaining walls". The order sought was described as "brick work faulty unfinished jobs". The total value of the claim was said to be $45,172.

8 On 25 March 2009 the directors resolved to appoint administrators to the defendant pursuant to s 436A of the Corporations Act.

9 On 13 May 2009 the company executed a deed of company arrangement. Other parties to the deed include two other companies in the Westminster Group namely Westminster Management Pty Ltd (administrators appointed) and Westminster (Sales) Pty Ltd (administrators appointed), the administrators (who were appointed as deed administrators), the directors of the defendant, Mr Barry Thurecht and Mr Michael Thurecht, and Westminster Building Co Pty Ltd. "Creditor" is defined in the deed as any person who has a "Claim". "Claims" is defined to mean relevantly all actions, claims, causes of action against the “Companies”, whether certain or contingent, present or future, ascertained or sounding only in damages in the circumstances giving rise to which occurred on or before the “Appointment Date”. “Appointment Date” means 25 March 2009. "Companies" is defined to mean Westminster Homes Pty Ltd (administrators appointed), Westminster Management Pty Ltd (administrators appointed) and Westminster (Sales) Pty Ltd (administrators appointed). The expression "Company" means any one of those companies.

10 Clause 2.3(a) provides that the claims of creditors will be pooled into a single claim pool.

11 Clause 2.3(b) provides that creditors will be entitled to prove against the Deed Fund in accordance with Clause 5.

12 Clause 3.1 provides that:

“ Creditors must accept their rights and entitlements specified in this deed in full satisfaction of all Claims which they have or claim to have in respect of each of the respective Companies. "

13 Clause 5 provides for the establishment of a deed fund and for distributions from the deed fund including ultimately the distribution of the balance of the deed fund pari passu in payment of a dividend in respect of all other “Admitted Claims of Creditors”.

14 The deed makes provision for the submission of claims and the adjudication on claims by the deed administrators.

15 Clause 3.2 provides for Claims to be released if the deed terminates pursuant to clause 12.1. That clause provides for termination of the deed by the deed administrators completing their tasks and distributing the deed fund to creditors in the manner contemplated by the deed.

16 Clause 3.3 provides for a moratorium of claims but envisages that leave might be obtained from the court for a Claim to be begun or continued against any Company.

17 Important for present purposes is clause 8.2. It provides:

“ 8.2 Subject to the consent of the Customers, Westminster Homes will
(a) satisfy obligations to Customers under the Partly Completed Building Contracts, and
(b) satisfy obligations to Customers in the pre-construction stage pursuant to Tender agreements current at the Appointment date,
provided that nothing in this deed shall diminish, vary or extinguish any rights, entitlements or remedies of any Customer or each of the respective Companies under the terms of any Partly Completed Building Contract or Tender agreements. "

18 “Customer" is defined to mean a person who entered into a “Building Contract” with a Company prior to the Appointment Date.

19 “Partly Completed Building Contracts" is defined to mean "the contracts entered into by Westminster Homes with Customers prior to the Appointment Date."

20 “Building Contract" is defined to mean:

" any contract entered into by the Company for the construction by the Company of a residential property prior to the appointment of the Voluntary Administrator on 25 March 2009. "

21 The plaintiff is a "Customer" as defined. It also appears to me to be clear that the building contract entered into by the plaintiff with Westminster Homes was a "Building Contract" as defined. That contract was also a "contract entered into by Westminster Homes with [a Customer] prior to the Appointment Date."

22 Senior counsel for Westminster Homes submits correctly that the plaintiff in his submissions made no reference to clause 8.2. Senior counsel submits that he was not prepared to argue the question as to whether by reason of Clause 8.2 the plaintiff is not a person who is bound by the deed in respect of his claim against Westminster Homes in the Tribunal.

23 More significantly, there is on foot separate proceedings in this Division between a Mr and Mrs Witt and Westminster Homes and the deed administrators being proceedings 49927 of 2010. Those proceedings are listed for hearing before the Corporations Judge on 12 October 2010 with an estimate of two days. In those proceedings Mr and Mrs Witt seek declarations as to the meaning of the deed of company arrangement.

24 By interlocutory process filed on 1 April 2010 in those proceedings, the deed administrators seek declarations as to the proper construction of the deed relevant to the definition of "Partly Completed Building Contracts".

25 The issue raised in those proceedings as to the construction of the deed appears to be the same as is raised in the present proceeding as to whether the plaintiff is a person bound by the deed.

26 The deed administrators also seek in the alternative the following relief:

“... [a] n order under s 447A of the Corporations Act 2001 that Part 5.3A is to operate in relation [to] the first plaintiff, Westminster Homes Pty Limited, as if the definition of 'Partly Completed Building Contracts' in paragraph 1.1 of the DOCA had always been in the following terms:
‘Partly Completed Building Contracts means the building contracts entered into by Westminster Homes with Customers, the building work under which had not been completed prior to the Appointment Date.” ’

27 Further relief is also sought under s 447A which does not appear to be material to the present question.

28 Prima facie it appears to me that if no order is made under s 447A, the plaintiff would not be entitled to the relief sought under s 444E as he is not a person bound by the deed in respect of his proceeding in the Tribunal.

29 That is because clause 8.2 provides that nothing in the deed of company arrangement shall diminish, vary or extinguish any right, entitlement or remedy of a Customer (which includes the plaintiff) under the terms of any Partly Completed Building Contract, which expression includes the contract entered into by the plaintiff with the defendant in August 2006.

30 Prima facie in those circumstances, the appropriate course would be to make a declaration to that effect. However, that course might not be useful if an order is made under s 447A of the Corporations Act as to how the deed of company arrangement is to operate.

31 If an order is made as sought by the deed administrators in their interlocutory process of 1 April 2010 in proceedings 49927 of 2010 (that the deed be amended by the amendment sought to the definition of "Partly Completed Building Contracts") it would still be at least strongly arguable that such amendment would not bar the plaintiff from proceeding in the Tribunal. His claim in the Tribunal is that the work under his building contract has not been completed because there is outstanding work required to be done to bring it up to the contractual requirements. A Scott Schedule has been prepared in the Tribunal which includes answers by the present defendant, Westminster Homes, through its director Mr Barry Thurecht in which he states that the defendant proposes to complete certain of the works.

32 However, senior counsel for the defendant has submitted that the intention behind the deed is that it was only those building contracts which had not been completed up to the point of handover which were intended to be included within the definition of Partly Completed Building Contracts to which clause 8.2 was to apply. He foreshadows the possibility that a further amendment might be sought pursuant to s 447A to that effect. If such an order were sought and were made, then that that would, prima facie at least, be a bar to the plaintiff's claim in the Tribunal. In those circumstances, prima facie, it would not be appropriate to grant leave under s 444E.

33 It is in these circumstances that the defendant proposes that the present application stand over until a time after the hearing of the application in proceedings 49927 of 2010. The plaintiff does not oppose that course and does not seek to have his proceeding listed for hearing at the same time as proceedings 49927 of 2010.

34 I will accordingly take that course and stand over these proceedings part heard before me to 1 November 2010.

35 The present defendant is a party to proceedings 49927 of 2010. It seems to me that those proceedings ought to be listed for further directions. That is so partly because there may be a question as to whether further relief will be sought under s 447A. If that relief is to be sought in those proceedings, then the sooner it is addressed, the better. Moreover, it seems to me that a question arises as to whether notice of the application has been and should be given to all creditors, or at least to those creditors who are Customers within the definition in the deed, and whether a representative order should be made in respect of such Customers.

36 At present, so far as I can see, there is no listing of proceedings 49927 of 2010 prior to the hearing on 12 October. I direct that those proceedings be listed in the Corporations List on 30 August 2010. I will arrange for my Associate to give notice to all of the parties of that listing.

37 I will request that the solicitors for the defendant in these proceedings advise the solicitors acting for the defendant in proceedings 49927 of 2010 and the deed administrators of that direction and the reasons for it and that either they or the solicitors acting for those parties in proceedings 49927 of 2010 advise the plaintiffs in those proceedings of the order. My Associate will also notify those parties.

38 I will deal with all questions of costs when the application is ultimately dealt with.

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