In the matter of Leasing Holdings Pty Ltd (Formerly Charlie Lovett Pty Limited)
[2015] NSWSC 1998
•20 April 2015
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Leasing Holdings Pty Ltd (Formerly Charlie Lovett Pty Limited) [2015] NSWSC 1998 Hearing dates: 20 April 2015 Date of orders: 20 April 2015 Decision date: 20 April 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Interlocutory process dismissed with costs.
Catchwords: PRACTICE AND PROCEDURE – undertakings – application for release from undertaking and substitution of alternative undertaking – where undertaking given as consideration for adjournment of proceedings for appointment of provisional liquidator – where proposed substituted undertaking would allow for divestment of assets otherwise available in future liquidation – held, inappropriate to grant release. Category: Procedural and other rulings Parties: Pran Central Shopping Centre Pty Limited ACN 122 550 207 (plaintiff/respondent)
Leasing Holdings Pty Limited (formerly Charlie Lovett Pty Limited) ACN 136 651 379 (defendant/applicant)Representation: Counsel:
Solicitors:
J Shepard (plaintiff/respondent)
N Mattock (defendant/applicant)
Kemp Strang (plaintiff/respondent)
Marque Lawyers (defendant/applicant)
File Number(s): 2015/14005
Judgment (ex tempore)
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HIS HONOUR: On 15 January 2015, the plaintiff Pran Central Shopping Centre Pty Limited filed an originating process, claiming an order that the defendant Leasing Holdings Pty Limited be wound up and a liquidator appointed. On 19 January 2015, the plaintiff filed an interlocutory process seeking the appointment of a provisional liquidator, relying in particular on certain events which took place on or about 13 January 2015 and by which it appeared that the name of the company was changed.
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The matter came before the Court for directions on 23 January 2015, when the defendant, by its director, gave an undertaking to the Court, effectual to preserve the status quo in respect of the company's affairs, which persuaded Ball J that the application for appointment of a provisional liquidator should be adjourned. As it seems to me from the transcript of 23 January 2015, the undertaking not to deal with assets of the company was fundamental in persuading his Honour that the appointment for a provisional liquidator should not proceed that day but should be adjourned.
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By interlocutory process filed on 10 April 2015, the defendant now seeks an order releasing its director Mr Nasser from that undertaking, and substituting another undertaking in its place. The relevant material difference is that the proposed substituted undertaking will not preclude the company from disposing of its leasehold interest in premises at Birkenhead Point, Tuggerah Westfield Shopping Centre and Wollongong Central Shopping Centre. These three leasehold interests are three of eight leases which together constitute the only assets of significance of the company.
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With one exception – being the lease in respect of the Neutral Bay premises – the company, though it is the lessee under the head lease and has the obligation of paying the rent, in fact does not receive (from the sublessee) or pay the rent, as its franchisee or sublessee in respect of each of the relevant premises pays the rent directly to the landlord by way of, in the case of the franchisees, part of the franchise fee. It is not possible to say on the material presently before the Court whether, notwithstanding that state of affairs, the company would have a right to receive the rent if, for example, it cancelled a direction to pay it directly to the head lessor. Nor is it possible to say at this stage with certainty whether the company would be entitled to receive some fee for agreeing to the assignment of the lease. What is significant, however, is that the eight leases, of which the present application relates to three, appear to be the only assets to which a liquidator could potentially have resort in the event of a winding up.
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I appreciate that there are significant apparent difficulties in the way of a liquidator generating anything from that course, including that it would appear that the head lessors would be entitled to terminate the leases upon appointment of a liquidator. However, it is not possible at this stage to foreclose the possibility that there might be some means by which the liquidator could extract some value from the leasehold interests for the benefit of creditors – the chief, if not the only, creditors being the head lessors (or some of them) themselves.
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In the context that this undertaking was given in substance as consideration for the application for appointment of a provisional liquidator not proceeding, where the appointment of a provisional liquidator would itself have been an insolvency event that triggered the termination of the leases; and where the purpose of seeking the appointment of a provisional liquidator was to preserve the status quo so that assets of the company were not divested; it would be inappropriate at this stage to permit a course to be embarked upon which would falsify the basis upon which the application for a provisional liquidator was adjourned, rather than being determined, and which would effectively enable the divestment of assets which, while ultimately this may not prove to have any value, alternatively may prove to have some value to a liquidator.
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Accordingly, I will dismiss the application that the defendant's director be released from the undertaking.
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Insofar as the substantive proceedings are concerned, they return to the Court for directions next Monday. It is conceivable that the Court may be able to hear them on Monday, and the parties should anticipate that. Otherwise, the Court will do what it can to find an early hearing date, but can hold out not much promise of that at the moment.
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The Court orders that the interlocutory process filed 10 April 2015 be dismissed with costs. The proceedings otherwise remain listed in the Corporation Judge's directions list on Monday 27 April at 10am.
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Decision last updated: 22 January 2016
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