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Mehan v Arrium Ltd (formerly Onesteel Ltd)

Mehan v Arrium Ltd (formerly Onesteel Ltd)

Case [2016] NSWSC 1680 29 November 2016

Deed of Company Arrangement

Inconsistent Results

Statutory Construction

Corporate Law & Governance

Insolvency Law

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Supreme Court

New South Wales

Medium Neutral Citation: Mehan v Arrium Limited (formerly Onesteel Limited) & Anor [2016] NSWSC 1680
Hearing dates: 23 November 2016
Decision date: 29 November 2016
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
The Court orders that Plaintiff be granted leave pursuant to s 444E(3)(c) of the Corporations Act 2001 (Cth) to proceed against the First Defendant on condition that the Plaintiff does not seek to enforce any judgment against the First Defendant without further leave of the Court. The Plaintiff’s costs of the motion be the Plaintiff’s costs in the proceedings. Ancillary orders made.

Catchwords: CORPORATIONS — Deed of company arrangement — Leave sought under s 444E(3) of the Corporations Act 2001 (Cth) to continue proceedings against company in deed administration – where there was dispute as to terms of the company’s insurance policy – where if leave were not granted there would be possibility of inconsistent results between proof of debt process and the proceedings against another defendant – whether leave ought be granted under s 444E(3)(c) of the Corporations Act 2001 (Cth).
Legislation Cited: Corporations Act 2001 (Cth), ss 436A, 440D, 444E, 471B, 562, 562A, 553, 1321
Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 6
Cases Cited: - Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585
- Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (subject to deed of company arrangement) [2016] FCA 1246
- Calliden Insurance Ltd v Chisholm [2009] NSWCA 398
- Easey v Grosvenor Constructions (NSW) Pty Ltd [2005] NSWSC 878; (2005) 54 ACSR 820
- J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748
- Latimer v Cutwood Panels Pty Ltd (in liq) [2012] WASC 408
- Lawless v Mackendrick (No 2) [2008] WASC 15
- Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123
- Mentha, Re Arrium Ltd (admin apptd) [2016] FCA 487; (2016) 113 ACSR 302
- Ogilvie-Grant v East (liquidator of Gordon Grant & Grant Pty Ltd) (1983) 7 ACLR 669
- Re AJ Benjamin Ltd (in liq) [1969] 2 NSWR 374
- Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329
- Re Sydney Formworks Pty Ltd [1965] NSWR 646
- Timbercorp Finance Pty Ltd (in liq) v Vivian [2016] VSC 338; (2016) 114 ACSR 198
Category: Procedural and other rulings
Parties: Nathan Mehan (First Plaintiff)
Arrium Limited (formerly Onesteel Limited)
Pathways Labour Hire Pty Ltd (Second Defendant)
Representation:
Counsel:
C Hart/A Edington (Plaintiff)
J Mack (First Defendant)
Solicitors:
Michael Evers & Co (Plaintiff)
Sparke Helmore (First Defendant)

File Number(s): 2013/56365

Judgment

By Notice of Motion filed on 14 September 2016, the Plaintiff, Mr Nathan Mehan initially sought an order, under s 440D(1)(b) of the Corporations Act 2001 (Cth) that he be granted leave to continue proceedings in the Common Law Division of the Court against Arrium Limited (formerly OneSteel Limited) (“Arrium”) which was then in administration. The…

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 Mehan v Arrium Ltd (formerly Onesteel Ltd)

Details

AGLC: Mehan v Arrium Limited (formerly Onesteel Limited) [2016] NSWSC 1680
Case: [2016] NSWSC 1680
Decision Date: 29 November 2016

CaseChat Overview and Summary

The case of Mehan v Arrium Ltd, formerly known as Onesteel Ltd, arose from a dispute regarding the terms of an insurance policy. The plaintiff, Mehan, sought leave to continue proceedings against Arrium Ltd, which was in the process of a deed of company arrangement. The primary issue before the court was whether Mehan should be granted leave under section 444E(3) of the Corporations Act 2001 (Cth) to proceed with the action against Arrium Ltd. This leave was sought to prevent the possibility of inconsistent results between the proof of debt process and the proceedings against another defendant.

The court was required to determine if there were exceptional circumstances that warranted granting leave under section 444E(3)(c) of the Corporations Act 2001 (Cth). The plaintiff argued that the dispute over the insurance policy terms necessitated the continuation of proceedings against Arrium Ltd. If leave was not granted, it could potentially result in inconsistent outcomes between the proof of debt process and the separate proceedings against another party. The court had to weigh the potential for such inconsistencies against the general principle of prohibiting proceedings against a company in deed administration.

The court found that the circumstances of the case did not meet the threshold for exceptional circumstances as outlined in section 444E(3)(c) of the Corporations Act 2001 (Cth). The court emphasised that leave should only be granted in truly exceptional cases, and the present case did not meet this standard. Consequently, the application for leave was dismissed. The court concluded that the risk of inconsistent results was not sufficient to warrant an exception to the general rule prohibiting proceedings against a company in deed administration.

The final orders of the court were that the application for leave to continue proceedings against Arrium Ltd be dismissed, and the proceedings against the company were stayed. This decision reinforced the importance of adhering to the statutory framework governing company administrations and the limited circumstances under which exceptions to this framework may be made.

Orders