Hamilton, William James & Anor (as administrators of Kisoro Pty Ltd) v National Australia Bank Ltd

[1996] FCA 163

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA                 )
NEW SOUTH WALES DISTRICT REGISTRY                )
GENERAL DIVISION  )    No. NG 3095 of 1996

BETWEEN:WILLIAM JAMES HAMILTON and PINO  FIORENTINO in their capacity as joint administrators of KISORO PTY LIMITED (ADMINISTRATOR APPOINTED)

(A.C.N. 002 202 084)
  Applicants

AND:NATIONAL AUSTRALIA BANK LIMITED

(A.C.N. 004 044 937)

First Respondent

IVANS BUTCHERY (NSW) PTY LIMITED

(A.C.N. 070 093 202)

Second Respondent

CORAM:Lehane J

PLACE:Sydney

DATE:22 February 1996

EXTEMPORE REASONS FOR JUDGMENT

LEHANE J: The applicants, who are the administrators of Kisoro Pty Limited, to which I shall refer as the Company, appointed on 11 December 1995, seek an order under s 444B(2) of the Corporations Law extending the time for the execution of a proposed deed of company arrangement. The execution of the deed has been approved by the requisite majority of creditors and there is evidence before me of the intention of the Company to execute the deed itself.
The circumstances in which the order is sought are these.  National Australia Bank Limited, to which I shall refer to as the Bank, holds a charge (which the evidence before me suggests may rank as a second charge) over the assets of the Company.  It is a condition precedent to the operation of the proposed deed of company arrangement - the condition is set out in clause 2(a) of the draft deed - that the Bank release the Company from the charge.

The evidence is that the Bank declines to execute a release of the charge, as is no doubt its right, and accordingly there is a further application to be heard by the Court in due course for an order under s 444F(2) of the Law that the Bank as a secured creditor of the Company not realise or otherwise deal with its security during the currency of the proposed deed of company arrangement.  There is also to be an application consequentially for an order omitting condition 2(a) from the deed.

It is in those circumstances that the question arises whether the Court in the exercise of its discretion under s 444B should grant further time for the execution of the proposed deed.  It is unnecessary for the purposes of this case, in my view, to explore this uncharted territory in full or to any extent outside the particular circumstances with which I am confronted today.  This, I must say, seems to me to be a reasonably clear case in which an order extending time ought to be made.

The creditors have, as I have said, approved the proposed execution of a deed; the Company intends to execute it.  There is however an impediment to the effective
operation of the deed which is that the Bank does not agree to relinquish its rights of enforcement under its deed of charge.  Clearly, as the deed stands, there would be no point in executing it while the Bank maintains that  attitude.  Equally clearly, if in due course an order were to be made under s 444F, there would be no reason why the deed should not proceed.

Section 444F itself is, so far as I am aware and so far as counsel have been able to discover, also relatively uncharted territory and an application for an order under that section is clearly a matter which will require substantial evidence and argument and careful consideration by the Court.

In those circumstances I propose to grant the application for an extension of time and I shall hear counsel as to the precise form of the order which should be made.

[Discussion ensued between his Honour and counsel].

I order under s 444B(2) of the Corporations Law that the period within which the deed of company arrangement is to be executed is the period expiring at 5 pm on 1 April 1996.

Secondly, I direct that the first respondent file and serve not later than Monday, 11 March 1996, the evidence on which it proposes to rely on the application under s 444F; that the applicants file and serve any evidence in reply not later than Monday,
18 March 1996; and that not later than the same day, Monday, 18 March 1996, the parties file and serve outline submissions. 

Costs will be reserved.

I certify that this and the preceding 3 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.

Associate:

Dated:  19 March 1996

Heard:  22 February 1996

Place:  Sydney

Decision:  22 February 1996

Appearances:  Mr J T Svehla of counsel appeared for the applicants.

Ms L J Massey of Dibbs Crowther & Osborne appeared for the first respondent.