Lean v Progolf Pty Ltd (Subject to a Deed of Company Arrangement)
[2000] WASC 185
•21 JULY 2000
LEAN -v- PROGOLF PTY LTD (Subject to a Deed of Company Arrangement) & ORS [2000] WASC 185
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 185 | |
| Case No: | COR:155/2000 | 14 JULY 2000 | |
| Coram: | MASTER BREDMEYER | 21/07/00 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed | ||
| PDF Version |
| Parties: | GRAEME TREVOR LEAN PROGOLF PTY LTD (Subject to a Deed of Company Arrangement) (ACN 009 223 698) WILLIAM ELLIS SURBER BILLY-JO SURBER COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LTD (ACN 074 707 458) |
Catchwords: | Company Administration Deed of company arrangement Variation to the same Application to set variation aside |
Legislation: | Corporations Law, s 436A, s 444B, s 444D, s 445A, s 445B, s 445G |
Case References: | MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636 Knight v FP Special Assets Pty Ltd (1992) 174 CLR 178 Milankov Nom v Roycol Ltd (1994) 14 ACSR 296 Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 Re Crawford House Press Pty Ltd (1995) 17 ACSR 295 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
PROGOLF PTY LTD (Subject to a Deed of Company Arrangement) (ACN 009 223 698)
First Defendant
WILLIAM ELLIS SURBER
BILLY-JO SURBER
Second Defendants
COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LTD (ACN 074 707 458)
Third Defendant
Catchwords:
Company - Administration - Deed of company arrangement - Variation to the same - Application to set variation aside
Legislation:
Corporations Law, s 436A, s 444B, s 444D, s 445A, s 445B, s 445G
(Page 2)
Result:
Application allowed
Representation:
Counsel:
Plaintiff : Mr A Metaxas
First Defendant : Mr G D Cobby
Second Defendants : Mr G D Cobby
Third Defendant : No appearance
Solicitors:
Plaintiff : Arthur Metaxas & Co
First Defendant : Tottle Christensen
Second Defendants : Tottle Christensen
Third Defendant : No appearance
Case(s) referred to in judgment(s):
MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636
Case(s) also cited:
Knight v FP Special Assets Pty Ltd (1992) 174 CLR 178
Milankov Nom v Roycol Ltd (1994) 14 ACSR 296
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Re Crawford House Press Pty Ltd (1995) 17 ACSR 295
(Page 3)
1 MASTER BREDMEYER: This is an application by the plaintiff under s 445B and s 445G of the Corporations Law to void or vary a deed of company arrangement. The orders sought are as follows:
"1. An order declaring void the amendments to the Deed of Company Arrangement between the applicant and the respondents as passed by the meeting of creditors of the first respondent on 31 May 2000;
2. alternatively, the said Deed of Company Arrangement be varied to include an indemnity to the applicant for his costs including those of any potential liability to the Town of Claremont as may be determined in CIV 1978 of 1997 in terms satisfactory to the applicant and to be secured by bank guarantee;
3. alternatively, the said Deed of Arrangement be declared void and the applicant be appointed liquidator of the first respondent; and
4. an order that the respondents pay the applicant's costs to be taxed."
2 Section 445B provides that where a deed of company arrangement is varied under s 445A, a creditor of the company may apply to the court for an order cancelling the variation. The plaintiff, who is the administrator under a deed of company arrangement, is a creditor of the company. He is owed fees of approximately $76,000.
3 Section 445G provides:
"445G(1)[Doubt about deed] Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed, a member or creditor of the company, or the Commission, may apply to the Court for an order under this section.
445G(2)[Court may declare deed void] On an application, the Court may make an order declaring the deed, or a provision of it, to be void or not to be void, as the case requires, on the ground specified in the application or some other ground.
(Page 4)
- 445G(3)[Court may declare deed valid] On an application, the Court may declare the deed, or a provision of it, to be valid, despite a contravention of a provision of this Part, if the Court is satisfied that:
(a) the provision was substantially complied with; and
(b) no injustice will result for anyone bound by the deed if the contravention is disregarded.
445G(4)[Court may vary deed] Where the Court declares a provision of a deed of company arrangement to be void, the Court may by order vary the deed, but only with the consent of the deed's administrator."
4 By way of background to this dispute, on 20 July 1998 the company resolved to appoint the plaintiff as administrator pursuant to s 436A of the Corporations Law. On 14 October 1998 the company's creditors resolved that the company should execute a deed of company arrangement. That deed was executed and is dated 4 November 1998. The parties to that deed, as originally drawn, are the plaintiff as the deed administrator, the company and the second defendants who were both directors of the company. The deed provides that the plaintiff is to prosecute the company's claim for damages against the Town of Claremont. That action has been brought in this Court and is CIV 1978 of 1997. The plaintiff was empowered to settle the action at any time, provided he acted in good faith - see cl 3.4. The second defendants agreed to advance to the company a loan to pay the costs to prosecute the action. The second defendants have to date advanced $180,000 for that purpose.
5 By a deed undated, the parties to the deed and the Commonwealth Development Bank agreed to vary the deed to the extent that the Bank was made a party. The details of that deed of variation are not relevant to this application except that I note it was signed by the plaintiff and the first defendant and I assume signed by the second and third defendants. I say assume because the copy produced to me is only signed by the plaintiff and the first defendant but the last clause in the deed, cl 25, provides that the deed may be executed in any number of counterparts. I assume that the second defendants and the bank signed a separate counterpart or counterparts.
6 The plaintiff has caused the action to be prosecuted to the point where it has been entered for trial. The trial of a preliminary issue on the
(Page 5)
- pleadings has been set for 2 August 2000. Trial dates are awaited for the main action. Pye & Quartermaine act as solicitors for the company in the action. They were appointed as the solicitors for the company prior to the appointment of the plaintiff as administrator under the deed.
7 The plaintiff and the second defendants have fallen out. The plaintiff's concerns are as to the sufficiency of the pre-trial preparation of the action; the sufficiency of expert evidence proposed to be adduced at the trial; he says the solicitors for the company are not being cooperative; and he is concerned about his potential liability for costs, should the action be dismissed.
8 On 31 May 2000 the plaintiff convened a meeting of creditors at the request of the second defendants. The creditors resolved to amend the deed in the terms of the resolution set out in the notice convening the meeting. The plaintiff spoke against the resolution but did not vote on it. The resolution passed was in these terms:
"5A Conduct of Action
5A.1 The directors shall have the conduct of the Action on behalf of the company.
5A.2 Clause 5a.1 is subject to:
5A.2.1 the directors causing the prosecution of the Action with due expedition and diligence.
5A.2.2 the directors shall not settle, compromise or discontinue the Action without the consent of the Administrator, which consent shall not be unreasonably withheld.
5A.2.3 the directors shall cause and so instruct the company's solicitors to, as reasonably possible provide, deliver or otherwise communicate, as the case may be, to the Administrator and the secured creditor:
5A2.3.1 any offer to settle or compromise the Action
5A2.3.2 any advice given in respect to the prosecution of the Action
5A2.3.3 copies of all accounts incurred in the prosecution of the Action or any agreement in respect to the fees or expenses of the Action.
(Page 6)
- 5A.3 the directors shall provide or cause the company's solicitors to provide a report every month as to the progress of the Action to the Administrator and the Secured Creditor."
9 A deed of company administration is at the very least a contract between the administrator and the company. Section 444B(5) provides that the administrator of the deed must execute the instrument before or as soon as practical after the company executes it. Section 444B(6) provides that the company must execute the deed and that when both the company and the deed's administrator have executed it, the instrument becomes a deed of company arrangement. The High Court in MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636 held that the deed of company arrangement need not be executed under seal. The deed of company arrangement is a special instrument in that it is binding on the creditors, although not signed by them. Section 444D(1) provides that it is binding on all creditors of the company. Section 444D(2) and (3) places secured creditors and owners and lessors of property in a special position.
10 Section 445A provides:
"VARIATION OF DEED BY CREDITORS
A deed of company arrangement may be varied by a resolution passed at a meeting of the company's creditors convened under section 445F, but only if the variation is not materially different from a proposed variation set out in the notice of the meeting."
11 The resolution passed by the creditors on 31 May 2000 was passed under s 445A. Following that resolution, no deed of variation has been executed by the plaintiff, the company or the second defendants. The defendants say that the variation is good and effective without the necessity for any deed to be signed. Section 445A, unlike s 444B(5), does not provide that the administrator must execute the varied deed. The defendants argue that the legislation is clearly different in its execution requirements for a deed of company arrangement and for a variation of that deed. The defendants say that if the position of the deed administrator has been weakened or unduly burdened by the variation, he can resign, or he can apply under s 445G to the court for an order setting aside the variation, or if he is a creditor, can apply under s 445B to have the variation cancelled.
(Page 7)
12 I consider the defendants have an argument that a variation is achieved by a resolution duly passed at a meeting of the company's creditors and does not require the execution or consent of the administrator because no express provision is made in s 445A or elsewhere for that execution or consent. However, I consider the argument is outweighed by three contrary arguments. I note that there is no decided case on this point. Firstly, s 445A is headed "Variation of Deed by Creditors". On first principles, to give words their natural and ordinary meaning, if a deed is to be varied there needs to be an instrument called a variation of deed to be executed by the relevant parties. (The relevant parties here are the same parties who signed the initial deed of company arrangement, ie the administrator, the company and the directors.) Or, the original deed could be amended in handwriting and those amendments initialled by the parties. Secondly, the resolution varying the deed under s 445A could affect adversely the powers and rights of the deed administrator. If his signature is required on a deed of variation, he can reject those amendments by refusing to sign. If his signature is not required he is stuck with them. It is not a satisfactory answer to that to say that he can resign. Yes he can resign as administrator, but that is for all purposes. In other words by resigning he loses his rights and obligations under the deed of company arrangement, in this case the deed signed on 4 November 1998. As in this case, he may be happy with that deed but opposed to the variation of that deed. I consider it only fair that an administrator should not have new burdens or liabilities thrust upon him by a creditor's meeting without his consent.
13 Thirdly, I consider there is a legislative hint which supports my interpretation that the consent of the deed's administrator is essential to an effective variation of the deed. I have quoted above the whole of s 445G - one of the two sections under which this application is brought. In summary it provides that, where there is doubt on a specific ground whether a deed of company arrangement was entered into in accordance with Part 5.3A of the Corporations Law, the administrator or a creditor (among others) may apply to the court for an order under this section. The court may declare the deed void or valid, and by subs (4), where the court declares part only of the deed to be void, it may by order vary the deed. It may, as it were, delete the invalid or void provision in the deed but retain the rest. But by subs (4) it can only vary the deed in this way with the consent of the deed's administrator. Clearly, by subs (4), the court is not able to affect the position of the deed's administrator in any way, without his consent.
(Page 8)
14 I consider the plaintiff's argument on this point is correct. I consider the variation of the deed of company arrangement under s 445A requires the administrator's consent. Whether that consent is shown by execution of a deed of variation or whether it is simply expressed in writing, I leave open. But I consider his consent is required. I consider that this administrator is affected adversely by the variation passed at the meeting of 31 May 2000. He has some say in the action but has lost total control of it. He has an indemnity for his fees under cl 16 of the deed of company arrangement from the assets of the company. That indemnity is not altered by the variation. But the directors may wish to prosecute the action when he wishes to settle it. If the company loses the action and the costs exceed the funds advanced by the directors, he will have to foot the bill. I will declare that the variation to the deed of company arrangement passed at a meeting of the creditors on 31 May 2000 is void. I am not willing to give any other relief save as to costs. I will hear the parties on costs.
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