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Honest Remark Pty Ltd v Allstate Explorations NL

Honest Remark Pty Ltd v Allstate Explorations NL

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Case Copied 21 July 2006 68 min read

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Reported Decision:
58 ACSR 234
201 FLR 456
(2006) 24 ACLC 936

New South Wales

Supreme Court

CITATION: Honest Remark Pty Limited v Allstate Explorations NL & ors [2006] NSWSC 735

HEARING DATE(S): 22/9/05, 21/10/05

JUDGMENT DATE :
21 July 2006

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

DECISION: Application for appointment of special purpose administrator dismissed with costs.

CATCHWORDS: CORPORATIONS – External administration – administration under deed of company arrangement – special purpose administrator – whether court has power to appoint special purpose administrator to investigate conduct of original administrators – nature and role of special purpose administrator – whether investigation and supervision of administrator is part of administration - whether order appointing special purpose administrator to investigate conduct of original administrators is an order as to how Part 5.3A is to operate in a particular case under s 447A – whether duty of liquidator or administrator extends to investigating own conduct in the administration – where no allegation that corporation would be better off if investigation conducted – whether failure to perform such investigation could be relevant prejudicial management for purposes of s 447E – whether court has inherent jurisdiction to appoint special purpose administrator for purpose of investigating conduct of deed administrator - whether power to appoint special purpose administrator, if it exists, could appropriately be exercised on the plaintiff’s case taken at its highest – where special purpose administrator inapt remedy and other appropriate and orthodox statutory remedies are available – held, taking plaintiff’s claim at its highest, no power to grant relief sought, but if there were power, it would be manifestly unreasonable to grant that relief - (Cth) Corporations Act, 2001, ss 236, 237, 241, 447A, 447E, 536, 1321.

LEGISLATION CITED: (Cth) Corporations Act 2001, ss 180, 181, 236, 237, 241, 247A, Part 5.3A, 435C(2)(a), 436A, 436B, 436C, 436D, 436E, 436F, 436G, 437A, 436A 438A, 444G(b), 445D, 445G, 447A, 447D, 447E, 449B, 473(8), 506(4), 536, 1321
(Cth) Trade Practices Act 1974, ss 52, 80
(NSW) Civil Procedure Act 2005, s 56(3)
(NSW) Supreme Court Act 1970, s 23
(NSW) Uniform Civil Procedure Rules, r 13.4

CASES CITED: ACCC v Z-Tek Computer Pty Ltd (1997) 78 FCR 197
Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230
Re AFG Insurances Limited (2002) 20 ACLC 1588
Agar v Hyde (2000) 201 CLR 552
Apple Computer v Wily [2003] NSWSC 719
Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270
Australian Securities and Investments Commission v McDougall [2006] FCA 427
Belvista Pty Limited v Murphy (1993) 11 ACSR 628
Re Biposo Pty Ltd (1995) 120 FLR 399
Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937
Re Charnley Davies Limited (No. 2) [1990] BCLC 760
Commercial Banking Co of Sydney Limited v Pollard [1983] 1 NSWLR 74
Cresvale Far East Limited (in liq) v Cresvale Securities Limited (No 2) (2001) 39 ACSR 622
Dallinger v Halcha Holdings Pty Ltd (1995) 60 FCR 594
Re a Debtor [1949]…

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: [2006] NSWSC 735
Decision Date: 21 July 2006

CaseChat Overview and Summary

Honest Remark Pty Ltd was a creditor of Allstate Explorations NL, which had entered into a deed of company arrangement, an insolvency arrangement under the Corporations Act 2001. Honest Remark sought the appointment of a special purpose administrator to investigate the conduct of the original administrators of the deed. The primary legal issue before the court was whether the court had the power to appoint a special purpose administrator to investigate the conduct of the original administrators of the deed. Additionally, the court had to determine the nature and role of a special purpose administrator, whether the investigation and supervision of an administrator was part of the administration, and whether the court's order appointing a special purpose administrator to investigate the conduct of the original administrators was an order as to how Part 5.3A of the Act was to operate in a particular case under section 447A.

The court found that there was no power to grant the relief sought by Honest Remark. While the court acknowledged that there may be circumstances where the appointment of a special purpose administrator to investigate the conduct of an administrator may be appropriate, in the present case, the court considered it manifestly unreasonable to grant such relief. The court held that the primary purpose of the administration was to achieve a compromise or arrangement between the company and its creditors, and the investigation of the conduct of the administrators was not part of that purpose. The court also found that the duty of the liquidator or administrator did not extend to investigating their own conduct in the administration, and that the failure to perform such an investigation could not be considered prejudicial management for the purposes of section 447E of the Act. Finally, the court held that the inherent jurisdiction of the court to appoint a special purpose administrator for the purpose of investigating the conduct of the deed administrator did not extend to the circumstances of this case, where other appropriate and orthodox statutory remedies were available.

The court did not grant the relief sought by Honest Remark and held that the appointment of a special purpose administrator to investigate the conduct of the original administrators of the deed was not an appropriate remedy in this case. The court found that the primary purpose of the administration was to achieve a compromise or arrangement between the company and its creditors, and that the investigation of the conduct of the administrators was not part of that purpose. The court also held that the duty of the liquidator or administrator did not extend to investigating their own conduct in the administration, and that the failure to perform such an investigation could not be considered prejudicial management for the purposes of section 447E of the Act.

Orders