In the matter of Mustang Marine Australia Services Pty Ltd (in liquidation)
[2015] NSWSC 2152
•17 December 2015
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Mustang Marine Australia Services Pty Ltd (in liquidation) [2015] NSWSC 2152 Hearing dates: 17 December 2015 Date of orders: 17 December 2015 Decision date: 17 December 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Compromise approved.
Catchwords: PROCEDURE – application by liquidator for approval of compromise of proceedings – Court not required to go behind liquidator’s commercial judgment, particularly where acting on legal advice – whether there is a ‘debt’ under (CTH) Corporations Act 2001, s 477(2A) – Court should treat claim as debt rather than declining relief due to possible lack of jurisdiction – where compromise entered into with no lack of good faith and not on erroneous view of law or principle – where no good reason to doubt prudence of compromise. Legislation Cited: (CTH) Corporations Act 2001, s 477(2A), s 479(3), s 588G Cases Cited: Elderslie Finance Corporation Limited v Newpage Pty Ltd (No 6) [2007] FCA 1030; (2007) 160 FCR 423
Engineered Thermal Systems Pty Ltd v Salmon [2012] FCA 1159
QBE Workers Compensation (NSW) Limited v G J Formwork Pty Ltd (2006) 56 ACSR 687; [2006] NSWSC 98
Re HIH Insurance Limited [2004] NSWSC 5Category: Procedural and other rulings Parties: Mitchell Ball in his capacity as official liquidator of Mustang Marine Australia (Services) Pty Ltd (in liquidation) (first plaintiff)
Mustang Marine Australia Services Pty Ltd ACN 129 124 223 (second plaintiff)
Standard Bank Asia Ltd (first defendant)
Russell Watkins (second defendant)
Martin Sheridan Lodge (third defendant)
Phillip Armstrong (fourth defendant)
Christopher Heaton (fifth defendant)
Standard Bank PLC (sixth defendant)Representation: Counsel:
Solicitors:
D L Cook (plaintiff/applicant)
By consent (defendants)
Minter Ellison Lawyers (first and sixth defendants)
William James Lawyers (second defendant)
DLA Piper Australia (third and fourth defendants)
Paul Bard Lawyers (plaintiffs)
File Number(s): 2012/228731
Judgment (ex tempore)
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HIS HONOUR: Before the Court is an application by the liquidator of the company Mustang Marine Australia Services Pty Ltd for approval pursuant to (CTH) Corporations Act 2001, s 477(2A), and/or a direction pursuant to s 479(3) in respect of the proposed compromise of proceedings brought by the liquidator against the defendants who are variously directors, former directors or an alleged shadow director of the company, pursuant to Corporations Act, s 588G, to recover as a debt due to the company loss said to have been occasioned to the company by insolvent trading prior to its going into liquidation.
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The substantive proceedings are set down for hearing before me for three weeks in February next year. The parties have provisionally agreed upon terms which are recorded in a document entitled "settlement agreement" which has not yet been executed but the draft of which is in evidence. Its practical effect is that the proceedings will be discontinued by consent in consideration of a payment to the liquidator of $2.5 million, the consequence of which will be that creditors of the company will receive a dividend in the order of 25 cents in the dollar.
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From the outset, these proceedings have been robustly, if not ferociously, contested. All parties are represented by competent and experienced counsel and solicitors and the liquidator himself is an experienced liquidator who must bring his commercial judgment and the advice that he has received into play. The liquidator has received advice to the effect that the settlement is a reasonable one. While it reflects but 10% or so of the sum claimed, of course the sum claimed does not necessarily bear any reasonable relationship to what is likely to be recovered even if the claim is successful.
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In the context of litigation of this kind, in which the parties are represented as they have been, the Court need not usually go behind the liquidator's commercial judgment, made with the benefit of the advice that he has received, knowing also that the claim is one in which the liquidator is funded by a litigation funder who no doubt has also formed a commercial view as to the desirability of this settlement.
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There is a question as to whether a claim of this kind is in respect of a debt, such as to fall within s 477(2A). Observations made by Foster J in Engineered Thermal Systems Pty Ltd v Salmon [2012] FCA 1159 (at [31]-[32]) provide some reason for thinking that there may be a debt involved. In any event, as Barrett J (as his Honour then was) has said in cases such as Re HIH Insurance Limited [2004] NSWSC 5 (at [12]) and QBE Workers Compensation (NSW) Limited v G J Formwork Pty Ltd (2006) 56 ACSR 687; [2006] NSWSC 98 (at [4]-[5]), where there is room for argument about whether a claim involves a debt within s 477(2A), the Court should err on the side of treating the claim as a debt rather than declining to grant approval on the ground of lack of jurisdiction. As Lindgren J suggested in Elderslie FinanceCorporation Limited v Newpage Pty Ltd (No 6) [2007] FCA 1030; (2007) 160 FCR 423 (at [27], [34]), the advice can be qualified in terms "to the extent that approval may be required."
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I am satisfied that the liquidator has taken legal advice in respect of the compromise and that the compromise is one entered into with no lack of good faith nor on any erroneous view of the law or principle, and there is no good reason to doubt the prudence of the compromise.
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The Court orders that:
pursuant to Corporations Act, s 477(2A), the compromise contained in the draft settlement agreement, a copy of which is Annexure A to the affidavit of Tim Bottrell sworn 16 December 2015 herein, be approved to the extent that such approval is required;
oursuant to Corporations Act, s 479(3), the liquidator would be justified in entering into the settlement deed; and
the plaintiff's costs of this application be costs in the winding up.
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Decision last updated: 22 September 2017
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