McGrath v Capena Contracting Pty Limited - [2009] FCA 665

FEDERAL COURT OF AUSTRALIA
Capena Contracting Pty Limited, in the matter of;
McGrath v Capena Contracting Pty Limited [2009] FCA 665
ANTHONY GREGORY MCGRATH, JOSEPH DAVID HAYES and SHAUN ROBERT FRASER v CAPENA CONTRACTING PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) and MAUNSELL AUSTRALIA PTY LTD
NSD 1115 of 2008
PERRAM J
18 JUNE 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1115 of 2008

BETWEEN:
ANTHONY GREGORY MCGRATH
First Applicant

JOSEPH DAVID HAYES
Second Applicant

SHAUN ROBERT FRASER
Third Applicant

AND:
CAPENA CONTRACTING PTY LIMITED
(SUBJECT TO DEED OF COMPANY ARRANGEMENT)
First Respondent

MAUNSELL AUSTRALIA PTY LTD
Second Respondent

JUDGE:

PERRAM J

DATE OF ORDER:

4 DECEMBER 2008

WHERE MADE:

SYDNEY

UPON THE SECOND RESPONDENT, BY ITS COUNSEL, UNDERTAKING:
(a)to diligently prosecute the proceedings BS 6761 of 2007 in the Supreme Court of Queensland; and

(b)not to seek to enforce any judgment which it might obtain against Capena Contracting Pty Ltd (Subject to Deed of Company Arrangement) in proceedings BS 6761 of 2007 in the Supreme Court of Queensland without the prior leave of the Court,

THE COURT ORDERS THAT:
1.Service of the Amended Originating Process filed by the Applicants be dispensed with, other than upon the Second Respondent.
2.Service of the Interlocutory application filed by the Second Respondent on 7 August 2008 be dispensed with, other than upon the Applicants.
3.Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to Capena Contracting Pty Limited (subject to a deed of company arrangement) so that the time for lodgement of the Maunsell Proof (as defined in Schedule 1 to these orders) be extended beyond the time allowed by clauses 4.2, 4.3 and 4.4 of the Mining Pool Deed of Company Arrangement.
4.The Second Respondent has leave of the Court pursuant to section 444E(3) of the Corporations Act to bring proceedings against Capena Contracting Pty Ltd (subject to Deed of Company Arrangement), seeking contribution in respect of any liability the Second Respondent may be held to have to the Plaintiffs in respect of the claims made in proceedings BS 6761 of 2007 in the Supreme Court of Queensland.
5.Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Mining Pool Entities set out in Schedule 2 to these orders (“Schedule 2”) as if the reference to Subdivision “E” in each of:
(a)paragraph 8 of Schedule 8A of the Corporations Act; and
(b)paragraph 3 of Schedule 4 of the Mining Pool Deed of Company Arrangement,

was amended by adding the words:
“(subject to varying the terms of s563B(2) of the Act by adding after the words ‘other than’, the words:
‘the following claims, classes of claims or potential claims:
·claim by the Australian Taxation Office
·claims by Maunsell Australia Pty Limited and/or Patrick Stevedores Operations (No 2) Pty Limited
·any other claim arising in respect of works performed…

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.

Continue reading McGrath v Capena Contracting Pty Limited

Details

AGLC: McGrath v Capena Contracting Pty Limited [2009] FCA 665
Case: [2009] FCA 665
Decision Date: 18 June 2009

CaseChat Overview and Summary

In the case of McGrath v Capena Contracting Pty Limited, the court was presented with a dispute involving the administrators of Capena Contracting Pty Limited and Maunsell Australia Pty Ltd. Capena Contracting, a subsidiary of Henry Walker Elkin Group Limited, had entered into voluntary administration along with its parent and sister companies. The administrators of Capena were responsible for managing the creditors, including Maunsell, which had contracted with Patrick Stevedores Operations for the design of pavements at Fisherman’s Island, part of the Port of Brisbane. When construction issues arose at the site, Patricks pursued damages against Maunsell, prompting Maunsell to seek an indemnity from Capena. The court was required to decide on the validity of Maunsell's claim against Capena within the framework of the deed of company arrangement and the Corporations Act.

The primary legal issue before the court was whether Maunsell's claim against Capena could be considered under the deed of company arrangement despite being lodged after the specified time limits. The court had to determine if the claim was barred under the deed provisions and if the Corporations Act allowed for the extension of time limits for such claims. Furthermore, the court needed to address whether the deed administrators could be justified in deferring adjudication of the claim pending the resolution of related proceedings and if they could make interim interest payments to other creditors before adjudicating on Maunsell's claim.

The court found that Maunsell's claim, although lodged late, was not barred by the deed of company arrangement provisions. The court interpreted the Corporations Act to permit the extension of time limits for such claims. It held that the deed administrators were justified in deferring the adjudication of Maunsell's claim and could make interim interest payments to other creditors. This decision balanced the need to fairly resolve Maunsell's claim against the interests of other creditors and the administration of the deed. The court concluded that the administrators' actions were reasonable and in the best interests of all creditors, including Maunsell.

Orders

Orders of the court

1. Service of the Amended Originating Process filed by the Applicants be dispensed with, other than upon the Second Respondent.

2. Service of the Interlocutory application filed by the Second Respondent on 7 August 2008 be dispensed with, other than upon the Applicants.

3. Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to Capena Contracting Pty Limited (subject to a deed of company arrangement) so that the time for lodgement of the Maunsell Proof (as defined in Schedule 1 to these orders) be extended beyond the time allowed by clauses 4.2, 4.3 and 4.4 of the Mining Pool Deed of Company Arrangement.

4. The Second Respondent has leave of the Court pursuant to section 444E(3) of the Corporations Act to bring proceedings against Capena Contracting Pty Ltd (subject to Deed of Company Arrangement), seeking contribution in respect of any liability the Second Respondent may be held to have to the Plaintiffs in respect of the claims made in proceedings BS 6761 of 2007 in the Supreme Court of Queensland.

5. Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Mining Pool Entities set out in Schedule 2 to these orders (“Schedule 2”) as if the reference to Subdivision “E” in each of:

(a) paragraph 8 of Schedule 8A of the Corporations Act; and

(b) paragraph 3 of Schedule 4 of the Mining Pool Deed of Company Arrangement,

was amended by adding the words:

“(subject to varying the terms of s563B(2) of the Act by adding after the words ‘other than’, the words:

‘the following claims, classes of claims or potential claims:

· claim by the Australian Taxation Office

· claims by Maunsell Australia Pty Limited and/or Patrick Stevedores Operations (No 2) Pty Limited

· any other claim arising in respect of works performed at Port of Brisbane, for Port of Brisbane Corporation (Contract314) and/or Patrick Stevedores Operations (No 2) Pty Limited (Contract 2004/Fi-C/01)

· any known claim arising in respect of Northparks Mine

· any known workers compensation or other personal injury claims

,and’”.

6. Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Non Core Entities set out in Schedule 2 as if the reference to Subdivision “E” in each of:

(a) paragraph 8 of Schedule 8A of the Corporations Act; and

(b) paragraph 3 of Schedule 4 of the Non Core Deed of Company Arrangement,

was amended by adding the words:

“(subject to varying the terms of s563B(2) of the Act by adding after the words ‘other than’, the words:

‘the following claims, classes of claims or potential claims:

· claim by the Australian Taxation Office

· claims by Maunsell Australia Pty Limited and/or Patrick Stevedores Operations (No 2) Pty Limited

· any known claim arising in respect of Northparks Mine

· any known workers compensation or other personal injury claims

,and’”.

7. Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Mining Pool Entities set out in Schedule 2 as if the deed of company arrangement given effect to pursuant to section 444A and executed pursuant to s444B was constituted by the Mining Pool Deed of Company Arrangement set out in Schedule 2, as varied, by adding new clauses 8.1.1 and 8.1.2, as follows:

“8.1.1 Notwithstanding clause 8.1(d) and (e), the Administrators may, subject to clause 8.1.2, attend to payment of some or all interest that may be payable, on a pro-rata basis, pursuant to clause 8.1(e)Ii) and (ii), before admission to proof and payment of the following claims, classes of claims, or potential claims:

· claim by the Australian Taxation Office

· claims by Maunsell Australia Pty Limited and/or Patrick Stevedores Operations (No 2) Pty Limited

· any other claim arising in respect of works performed at Port of Brisbane, for Port of Brisbane Corporations (Contract 314) and/ or Patrick Stevedores Operations (No 2) Pty Limited (Contract 2004/Fi-C/01)

· any known claim arising in respect of Northparks Mine

· any known workers compensation or other personal injury claims

8.1.2 The Administrators must, without admissions as to the validity or quantum of any claims or potential claims referred to in clause 8.1.1, make a reasonable estimate of the value of such claims, and provision for them from Deed Funds held by them pursuant to each of the Deed of Company Arrangement set out in Schedule 3, or from insurance policies which cover such claims.”

8. Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Non Core Entities set out in Schedule 2 as if the deed of company arrangement given effect to pursuant to section 444A and executed pursuant to s444B was constituted by the Non Core Deed of company Arrangement set out in Schedule , as varied, by adding new clauses 8.1.1 and 8.1.2, as follows:

“8.1.1 Notwithstanding clause 8.1(h) and (i), the Administrators may, subject to clause 8.1.2, attend to payment of some or all interest that may be payable, on a pro-rata basis, pursuant to clause 8.1(i)(i) and (ii), before admission to proof and payment of the following claims, classes of claims, or potential claims:

· claim by the Australian Taxation Office

· any known workers compensation or other personal injury claims

8.1.2 The Administrators must, without admission as to the validity or quantum of any claims or potential claims referred to in clause 8.1.1, make a reasonable estimate of the value of such claims, and provision for them from Deed Funds held by them pursuant to each of the Deeds of Company Arrangement set out in Schedule 3, or from insurance policies which cover such claims.

9. The costs of the Applicants be costs in the administration of the First Respondents.

PURSUANT TO SECTION 447D OF THE CORPORATIONS ACT 2001, THE COURT DIRECTS THAT:

10. The Applicants, as Deed Administrators of the Mining Pool Deed of Company Arrangement and of the Non Core Deed of Company Arrangement (as defined in Schedule 2) are justified:

(a) in deferring adjudication of the Maunsell Proof, pending the resolution of proceedings BS 6761 of 2007 in the Supreme Court of Queensland; and

(b) in making a payment of the interest payable pursuant to:

(i) clause 8.1 (e) of the Mining Pool Deed of Company Arrangement; and

(ii) clause 8.1(i) of the Non Core Deed of Company Arrangement,

as the case may require, to Participating Creditors so entitled thereunder, prior to adjudication of the Maunsell Proof.

Note:

Background

Background to the litigation

On 4 December 2008 I made orders in this proceeding on the application of Maunsell Australia Pty Ltd (“Maunsell”), the second respondent. Formally those orders were opposed by the administrators of Capena Contracting Pty Limited (“Capena”). These are my reasons for making those orders.Background Capena is a subsidiary of a previously listed company Henry Walker Elkin Group Limited. Each of the companies in that group went into voluntary administration on 31 January 2005. Subsequently each member of the group entered into a number of deeds of company arrangement. The deed administrators admitted to proof under all of these deeds creditors totalling approximately $302 million. With one exception, all of those creditors have been paid their entitlements in full or have otherwise been provided for by the deed administrators. The present application arose out of the single creditor who is not in that position, Maunsell. On 11 December 2002, some years before the administrators’ appointment, Maunsell entered into a contract with Patrick Stevedores Operations Pty Limited for the design of the pavement for berths 8B and 9 at Fisherman’s Island. Fisherman’s Island is part of the container terminal for the Port of Brisbane. Capena was a construction company and in or around March 2004 it entered into a contract with Patrick Stevedores Operations (No 2) Pty Limited (“Patricks”) for the construction of berths 8B and 9 (the pavement of which was designed by Maunsell). Capena performed some construction work under this contact but did not complete that work prior to being placed in voluntary administration on 31 January 2005. Upon that event Patricks terminated the Capena contract. Patricks became aware of issues with pavement failures at Fisherman’s Island in or about March 2006. They notified the designers, Maunsell, of rutting in some of the pavements on 1 April 2006. Further pavement difficulties were notified to Maunsell intermittently throughout 2006. On 8 August 2007, Patricks commenced proceedings in the Supreme Court of Queensland against Maunsell seeking damages for alleged pavement failure at berths 8B and 9. Maunsell did not anticipate that claim. By contrast the administrators of Capena were aware that there were issues about the paving at the terminal and, indeed, had become so aware the previous year in December 2006. Shortly after the commencement by Patricks of those proceedings, Maunsell lodged a proof of debt with the administrators of Capena asserting an entitlement to an indemnity from Capena, as builder. The proof of debt was lodged on 16 November 2007, that is, within a few months of the commencement of the proceedings.The Mining Pool Deed of Company Arrangement One of the deeds of company arrangement to which Capena is a party is the ‘Mining Pool’ deed of company arrangement. Clause 4.4 of that deed provides:4.4 Claims barred All Claims and rights of action and remedies in respect thereof by a Creditor not submitted in accordance with the provisions of either Clause 4.2 or Clause 4.3 or not proved in accordance with Clause 4.6 to 4.8 shall be forever absolutely barred and extinguished against the relevant Mining Pool Entity in accordance with this Deed.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

PERRAM J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: PERRAM J

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IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1115 of 2008

JUDGE:	PERRAM J
DATE OF ORDER:	4 DECEMBER 2008
WHERE MADE:	SYDNEY