JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MARK ANTHONY KORDA and DAVID JOHN WINTERBOTTOM As Receivers and Managers of WESTPOINT CORPORATION PTY LTD (In Liq) (Receivers and Managers Appointed) and the companies listed in Schedule 1 -v- SILKCHIME PTY LTD (Receivers and Managers Appointed) atf SILKCHIME UNIT TRUST [2010] WASC 155
CORAM: LE MIERE J
HEARD: 23-25 FEBRUARY 2010
DELIVERED : 25 JUNE 2010
FILE NO/S: COR 173 of 2009
MATTER :Westpoint Corporation Pty Ltd (ACN 009 395 751) (in liq) (Receivers and Managers Appointed) and the companies listed in Schedule 1
BETWEEN: MARK ANTHONY KORDA and DAVID JOHN WINTERBOTTOM As Receivers and Managers of WESTPOINT CORPORATION PTY LTD (In Liq) (Receivers and Managers Appointed) and the companies listed in Schedule 1
Plaintiffs
AND
SILKCHIME PTY LTD (Receivers and Managers Appointed) atf SILKCHIME UNIT TRUST
First DefendantWARWICK ENTERTAINMENT CENTRE PTY LTD (Receivers and Managers Appointed) atf WARWICK ENTERTAINMENT CENTRE UNIT TRUST
Second DefendantHUNTINGDALE VILLAGE PTY LTD (Receivers and Managers Appointed) atf the Huntingdale Village Unit Trust
Third DefendantPARAGON APARTMENTS LTD (Receivers and Managers Appointed)
Fourth DefendantVANNIN PTY LTD (Receivers and Managers Appointed) atf the HAY FAMILY TRUST
Fifth DefendantPERPETUAL NOMINEES LTD as Custodian of the ING Mortgage Pool for ING Funds Management Ltd as the Responsible Entity of the ING Mortgage Pool
Sixth Defendant
Catchwords:
Corporations - Company in liquidation - Application for directions under s 424 Corporations Act 2001 (Cth) - Whether the Receivers are obliged to realise floating charge assets pursuant to s 433 Corporations Act 2001 (Cth) - Floating charge assets comprising of causes of action - Whether the Receivers are obliged to retire - Whether the Receivers are entitled to create a retention fund - Declaration as to proper construction of provisions
Legislation:
Corporations Act 2001 (Cth), s 424, s 433
Supreme Court Act 1935 (WA), s 25(6)
Result:
Directions in the terms set out in the reasons
Declarations in the terms set out in the reasons
Category: A
Representation:
Counsel:
Plaintiffs: Dr A S Bell SC & Mr J A Thomson
First Defendant : Mr J W S Peters SC & Mr E F Wheelahan
Second Defendant : Mr J W S Peters SC & Mr E F Wheelahan
Third Defendant : Mr J W S Peters SC & Mr E F Wheelahan
Fourth Defendant : Mr J W S Peters SC & Mr E F Wheelahan
Fifth Defendant : Mr J W S Peters SC & Mr E F Wheelahan
Sixth Defendant : Mr J C Vaughan
Solicitors:
Plaintiffs: Corrs Chambers Westgarth
First Defendant : Consult Solicitors
Second Defendant : Consult Solicitors
Third Defendant : Consult Solicitors
Fourth Defendant : Consult Solicitors
Fifth Defendant : Consult Solicitors
Sixth Defendant : Minter Ellison
Case(s) referred to in judgment(s):
ASIC v Lanepoint Enterprises Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524
Buchler v Talbot [2004] 2 AC 298; (2004) 2 WLR 582
Deputy Commissioner of Taxation v Best & Less (Wollongong) Pty Ltd (1992)…
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- AGLC
- Korda v Silkchime Pty Ltd [2010] WASC 155
- Case
- [2010] WASC 155
- Decision Date
CaseChat Overview and Summary
The legal issues before the court centred on whether the receivers were obliged to realise the floating charge assets, specifically the Westpoint causes of action, to ensure the priority creditors were paid, even if it meant that ING might be paid in full but the priority creditors would not be. Additionally, the court was required to determine whether the receivers were obliged to retire and whether they were entitled to create a retention fund. These issues raised questions about the scope of the receivers' duties and the proper interpretation of the relevant statutory provisions.
In reaching its decision, the court considered the nature of directions under section 424 of the Corporations Act, noting that such directions do not bind third parties in relation to substantive issues, even when those third parties are joined as defendants. The court also acknowledged the flexibility of court procedures to transform directions proceedings into substantive rights determinations when appropriate. The court found that the liquidators were not required to continue to realise commercially viable floating charge assets, such as pursuing reasonable causes of action, if doing so would not satisfy the outstanding entitlements of the priority creditors. The court held that the liquidators were not obliged to retire and that they were entitled to create a retention fund if deemed appropriate.
The final orders of the court were that the liquidators were not required to pursue the Westpoint causes of action to pay the priority creditors if doing so would not satisfy their claims. The court also found that the liquidators were not obliged to retire and that they had the authority to create a retention fund if necessary. This decision provides clarity on the duties of liquidators in similar circumstances, ensuring that they can act in the best interests of the creditors while also considering the commercial viability of the assets they are managing.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
It has been suggested that the reported and unreported authorities reveal discordant judicial opinion on the issue of whether an order under s 479(3) of the Act, and analogously an order under s 424 of the Act, can bind third parties in relation to substantive issues: Johnson R 'The Power of the Court to Give Directions to a Liquidator ‑ Plagued by Uncertainty?' (2005) 13 Insolv LJ 213, 223. The better view is that a direction under s 424 does not bind third parties in relation to substantive issues even when they are joined as defendants to the proceedings. In White v Huxtable, In the Matter of Lake Federation Pty Ltd (receivers and managers appointed) [2006] FCA 559; (2006) 57 ACSR 435 Young J said:A direction under s 424 of the Corporations Act is a direction only. A direction in that form does not address the question whether the receivers have acted reasonably and/or discharged their duties under s 420A. Nor is such a direction binding on the defendants in such a way as to create any kind of legal estoppel. This is so notwithstanding that the directors have been joined in the proceeding as defendants and filed material opposing the making of the direction in the original form [21]. In addition to seeking directions under s 424 of the Act, the Receivers seek declarations under s 25(6) of the Supreme Court Act or the inherent jurisdiction of the court. In respect of proceedings seeking directions under provisions similar to s 424, it has been held that the court has sufficient flexibility in its procedures to enable proceedings begun as an application for directions to be converted into proceedings for the determination of substantive rights. In Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674; (1991) 5 ACSR 673 McLelland J expressly acknowledged the possibility that the rules and procedures of the court were sufficiently malleable to permit directions proceedings to be transformed into proceedings more suitable for the determination of substantive rights (680). The parties which are potentially affected by the directions or declarations sought by the Receivers have been joined as parties to these proceedings. The Originating Process has been amended to seek declarations under s 25(6) of the Supreme Court Act or the inherent jurisdiction of the court. The defendants accepted that they were not prejudiced by reason of that amendment. The court has power to make declarations in these proceedings if it is appropriate to do so. In their amended Originating Process the Receivers seek a direction as to whether they are obliged or entitled, by reason of s 433 of the Act, to realise the floating charge assets consisting of the Westpoint causes of action in order to pay the Priority Creditors in circumstances where ING might otherwise be paid in full but the Priority Creditors would not be paid. In their written submissions, the Receivers stated that the issue upon which directions are sought is whether the Receivers are required to continue to realise commercially viable floating charge assets, in this case by pursuing reasonable causes of action, in order to pay outstanding entitlements of the Priority Creditors which will not be satisfied out of existing net realisations of floating charge assets.