Mizuho Bank Ltd v Mark Anthony Ackroyd - [2016] NSWSC 1148

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Mizuho Bank Ltd -v- Mark Anthony Ackroyd [2016] NSWSC 1148
Hearing dates: 29 July 2016
Decision date: 19 August 2016
Jurisdiction: Equity - Commercial List
Before: Hammerschlag J
Decision:
Motion for stay of proceedings filed on 26 July 2016 dismissed

Catchwords: CORPORATIONS – Corporations Act 2001 (Cth) – s 440J(1) provides that during the administration of a company a guarantee of a liability of the company cannot be enforced as against a director of the company who is a natural person and that a proceeding in relation to such a guarantee cannot be begun against such a director, except with the leave of the Court – proceedings on a guarantee given by a director were begun before the administration – whether s 440J(1) applies to such proceedings – HELD the section does not apply
Legislation Cited: Corporations Act 2001 (Cth)
Motor Traffic Act 1909 (NSW)
Public Trustee Act 1978 (Qld)
Cases Cited: Bank of Western Australia Limited v Clift (2010) 80 ACSR 163; [2010] QSC 366
Coates Hire Operations v McNaughton (2006) 58 ACSR 518
Di Carlo v Kashani-Malaki (2013) 2 Qd R 17
Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99
Hanson & Younghan Pty Ltd [1987] VR 615
Holt v AEG Electric Co [1918] 1 Ch 320
Mudginberri Station Pty Ltd v Langhorne (1985) 7 FCR 482
Muirfield Properties Pty Ltd v Hanson & Younghan Pty National Australia Bank v King (2003) 45 ACSR 413
R v Bates [1982] 2 NSWLR 894
Re Behan Ex parte Pioneer Concrete (Qld) Pty Ltd (1995) 17 ACSR 725
Shergold v Tanner (2002) 209 CLR 126
Wade v New South Wales Rutile Mining Co Pty Ltd (1969) 121 CLR 177
Wallabah Pty Ltd v Navillo (1997) 23 ACSR 444
Category: Principal judgment
Parties: Mizuho Bank Ltd - Plaintiff/Respondent
Mark Anthony Ackroyd - Defendant/Applicant
Representation:
Counsel:
G. Ng - Plaintiff/Respondent
A. Stewart SC with T. March - Defendant/Applicant
Solicitors:
Ashurst - Plaintiff/Respondent
Thynne + Macartney - Defendant/Applicant

File Number(s): 2016/178533

Judgment

HIS HONOUR: The plaintiff bank lent National Plant & Equipment Pty Ltd (the company) a significant sum of money. As at 9 June 2016, the company owed it $44,481,375.87. The defendant has at all material times been a director of the company. He guaranteed the company’s obligations to the plaintiff to an amount not exceeding $20,040,000, plus accrued interest and costs.
On 10 June 2016, the plaintiff begun proceedings against the defendant on his guarantee by suing out a summons, supported by a commercial list statement, seeking judgment against him for $20,281,169.31.
On 14 July 2016, under s 436A of the Corporations Act 2001 (Cth) (the Act), the company appointed administrators. References beneath to sections are to sections of the Act, unless the context requires otherwise.
Section 440J provides:

Administration not to trigger liability of director or relative under guarantee of company's liability

(1) During the administration of a company:
(a) a guarantee of a…

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.

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Details

Case: [2016] NSWSC 1148
Decision Date: 19 August 2016

CaseChat Overview and Summary

Mizuho Bank Ltd instituted proceedings against Mark Anthony Ackroyd, a director of a company that had become insolvent, seeking to enforce a personal guarantee given by Ackroyd in respect of the company's debts. The dispute centred on whether section 440J(1) of the Corporations Act 2001 (Cth) applied to prevent the enforcement of the guarantee and the initiation of proceedings against Ackroyd during the administration of the company. The case was heard in the Federal Court of Australia.

The central legal issue before the court was whether section 440J(1) of the Corporations Act 2001 (Cth) applied to bar proceedings on a guarantee given by a director of an insolvent company if those proceedings were initiated before the commencement of the company's administration. The court needed to determine whether the prohibition on enforcing guarantees against directors during administration applied retrospectively to proceedings that were begun before the administration began.

The court held that section 440J(1) does not apply to proceedings that were commenced before the administration of the company began. The court reasoned that the statutory protection afforded to directors under section 440J(1) is specifically tied to the period of administration, and thus, it does not extend to proceedings that were initiated prior to the administration. The court concluded that because the proceedings against Ackroyd were begun before the company entered administration, the provisions of section 440J(1) did not prevent the enforcement of the guarantee or the continuation of the proceedings.

In light of the court's decision, the Federal Court of Australia determined that Mizuho Bank Ltd could proceed with its enforcement of the personal guarantee given by Mark Anthony Ackroyd. The court's ruling clarified the scope of section 440J(1) and its application to the timing of proceedings related to personal guarantees given by directors of insolvent companies.

Orders