Modscape Holdings Pty Ltd v Caspaney, in the matter of ACN 122 909 040 Pty Ltd (in liq) (formerly Modscape Pty Ltd)
[2019] FCA 2137
•16 December 2019
FEDERAL COURT OF AUSTRALIA
Modscape Holdings Pty Ltd v Caspaney, in the matter of ACN 122 909 040 Pty Ltd (in liq) (formerly Modscape Pty Ltd) [2019] FCA 2137
Appeal from: Application for leave to appeal (VID 1354 of 2019): Order dated 5 December 2019 in VID 753 of 2019 File number(s): VID 753 of 2019
VID 1354 of 2019Judge(s): ANDERSON J Date of judgment: 16 December 2019 Date of publication of reasons: 17 December 2019 Catchwords: PRACTICE AND PROCEDURE – application to vary interlocutory orders of the Court
PRACTICE AND PROCEDURE – appeals – application for leave to appeal from interlocutory decision of single judge of the Court – whether the decision of primary judge was attended by sufficient doubt to warrant reconsideration by Full Court
INSOLVENCY – where company in liquidation – where liquidator is required to convene meeting of creditors – where primary judge ordered that relevant creditors were entitled to vote at meeting in number and in proportion to amounts recorded in liquidator’s report – whether this order was inconsistent with r 75-85(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR)
Held: applications dismissed – primary judge’s orders not inconsistent with s 75-85(2) of IPR – primary judge’s orders not attended by sufficient doubt
Legislation: Corporations Act 2001 (Cth) s 1324
Federal Court of Australia 1976 (Cth) ss 24(1A), 25(2), 35A(5)
Insolvency Practice Schedule (Corporations) (Schedule 2 of the Corporations Act 2001 (Cth)) ss 75-15, 90-15, 105-1
Federal Court Rules 2011 (Cth) r 39.05
Insolvency Practice Rules (Corporations) 2016 (Cth) rr 75-85(2), 75-115, 75-250, 75-250(2)(a)Cases cited: Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; 33 FCR 397 Date of hearing: 16 December 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 47 Counsel for the Plaintiffs in VID 753 of 2019/
Respondents in VID 1354 of 2019:Mr S K Wilson QC with Mr B J Murphy Solicitor for the Plaintiffs in VID 753 of 2019/
Respondents in VID 1354 of 2019:Findlay Arthur Phillips Counsel for the Defendant in VID 753 of 2019/
Applicant in VID 1354 of 2019:Mr D P Gilbertson QC with Mr L P Wirth Counsel for the Defendant in VID 753 of 2019/
Applicant in VID 1354 of 2019:Rothwell Lawyers Counsel for Applicant for Leave to Intervene: Ms B Slocum Solicitor for Applicant for Leave to Intervene: Gadens ORDERS
VID 753 of 2019 BETWEEN: MODSCAPE HOLDINGS PTY LTD (ACN 617 645 182)
First Plaintiff
MODSCAPE COMMERCIAL PTY LTD (ACN 619 651 535)
Second Plaintiff
MODULAIR PTY LTD (ACN 144 653 529) (and others named in the Schedule)
Third Plaintiff
AND: MICHAEL CASPANEY (IN HIS CAPACITY AS LIQUIDATOR OF ACN 122 909 040)
Defendant
JUDGE:
ANDERSON J
DATE OF ORDER:
16 DECEMBER 2019
THE COURT ORDERS THAT:
1.The defendant’s interlocutory application dated 13 December 2019 is dismissed.
2.The defendant pay the plaintiffs’ costs of and incidental to that application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
VID 1354 of 2019 BETWEEN: MICHAEL CASPANEY (IN HIS CAPACITY AS LIQUIDATOR OF ACN 122 909 040)
Applicant
AND: MODSCAPE HOLDINGS PTY LTD (ACN 617 645 182)
First Respondent
MODSCAPE COMMERCIAL PTY LTD (ACN 619 651 535)
Second Respondent
MODULAIR PTY LTD (ACN 144 653 529) (and others named in the Schedule)
Third Respondent
JUDGE:
ANDERSON J
DATE OF ORDER:
16 DECEMBER 2019
THE COURT ORDERS THAT:
1.The application for leave to appeal is dismissed.
2.The applicant pay the respondents’ costs of and incidental to the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ANDERSON J:
Introduction
On 13 December 2019, Michael Caspaney (Liqudiator), in his capacity as liquidator of ACN 122 909 040 Pty Ltd (In Liquidation) (Company), urgently lodged two interrelated applications in this Court. The applications were made in distinct proceedings, although they both challenge an aspect of orders made by a judge of this Court on 5 December 2019 (Primary Judge’s Orders) in proceeding VID 753 of 2019 (Meeting Proceeding).
The two applications by the Liqudiator (collectively, the Liqudator’s Applications) are:
(a)an application in the Meeting Proceeding to vary the Primary Judge’s Orders; and
(b)an application in a new proceeding, VID 1354 of 2019 (Appeal Proceeding), for leave to appeal the Primary Judge’s Orders.
As explained in detail below, the urgency of the Liquidator’s Applications arises in relation to the meeting of creditors of the Company scheduled to be held today, on 17 December 2019, pursuant to the Primary Judge’s Orders. It is the stated intention of the majority of the creditors of the Company to replace the Liqudiator at that meeting. The immediate purpose of the Liquidator’s Applications is to stay the Primary Judge’s Orders such that the meeting will not proceed tomorrow. The Liquidator’s Applications then challenge an aspect of the Primary Judge’s Orders about what is to occur at the meeting.
Yesterday, on 16 December 2019, I heard the Liquidator’s Applications as the Commercial & Corporations Duty Judge. After hearing counsel for the Liquidator, I provided ex tempore reasons dismissing the Liquidator’s Applications. A revised version of those reasons is set out below.
Background
The factual background to this dispute is lengthy. For immediate purposes, and given the urgent nature of the Liquidator’s Applications, it is sufficient to summarise the key facts as follows.
The Company was registered on 29 November 2006 under the name “Modscape Pty Ltd”.
The Company was wound up on 7 February 2019. The Liquidator was appointed liquidator of the Company as at that date.
The eight plaintiffs in the Meeting Proceeding (collectively, the Relevant Creditors) are creditors of the Company. It should also be noted that the seventh and eight plaintiffs are directors of the Company and the sixth plaintiff is a former director of the Company.
Separate proceedings are currently on foot in the Supreme Court of Victoria (Supreme Court Proceeding) in which four companies (collectively, the New Modscape Group), including the first plaintiff in the Meeting Proceeding, Modscape Holdings Pty Ltd, and the second plaintiff in the Meeting Proceeding, Modscape Commercial Pty Ltd, seek relief against the Liquidator in respect of particular assets sold by the Company to the New Modscape Group prior to the Company going into administration (and later liquidation).
On 14 June 2019, the accountant for the New Modscape Group, Mr Paul Luntz, sent an email to the Liquidator attaching letters from the first and second plaintiff in the Meeting Proceeding, which in turn requested that the Liquidator call a meeting of creditors in accordance with s 75-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Corporations Act 2001 (Cth). For reference, s 75-15 of the IPS provides as follows:
75-15 External administrator must convene meeting in certain circumstances
(1) The external administrator of a company must convene a meeting of the creditors if:
(a) where there is a committee of inspection—the committee of inspection directs the external administrator to do so; or
(b) the creditors direct the external administrator to do so by resolution; or
(c) at least 25% in value of the creditors direct the external administrator to do so in writing; or
(d) both of the following are satisfied:
(i) less than 25%, but more than 10%, in value of the creditors direct the external administrator to do so in writing;
(ii) security for the cost of holding the meeting is given to the external administrator before the meeting is convened; or
(e) all of the following are satisfied:
(i) the company is being wound up under a creditors’ voluntary winding up;
(ii) less than 25%, but more than 5%, in value of the creditors direct the external administrator to do so in writing;
(iii) none of the creditors who give the direction is a related entity in relation to the company;
(iv) the direction is given no more than 20 business days after the resolution for the voluntary winding up of the company is passed.
(2) However, the external administrator need not comply with the direction if the direction is not reasonable.
(3) The Insolvency Practice Rules may prescribe circumstances in which a direction is, or is not, reasonable.
(4) For the purposes of paragraphs (1)(c), (d) and (e), the value of the creditors is to be worked out by reference to the value of the creditors’ claims against the company that are known at the time the direction is given.
(5) This section does not apply if:
(a) the external administrator is a provisional liquidator of the company; or
(b) the external administrator is the administrator of the company and the company is under administration.
The letters from the first and second plaintiffs in the Meeting Proceeding requested that the Liquidator urgently call a meeting of creditors with a view to changing the liquidator of the Company to Mr Peter Goodin. The context behind this request was explained as follows in Mr Luntz’ cover email to the Liquidator:
My clients are mindful of the fact that you have stated you are without funds to run the current litigation which is afoot with my clients [in the Supreme Court of Victoria] and they therefore advise that if you are removed as liquidator and replaced by Mr Goodin they will immediately withdraw their current action against you in order to avoid any further costs being incurred by you. Further they requests that the meeting of creditors be called urgently so as to avoid costs to all parties as the matter has been adjourned for 4 weeks and there is a window of opportunity to have the meeting on an urgent basis and replace you as liquidator before you incur further costs.
Please call the meeting as requested on an urgent basis
On 17 June 2019, Mr Luntz forwarded by email a letter from the fifth plaintiff in the Meeeting Proceeding, Nunn Bros. Haulage Pty Ltd, to the Liquidator also requesting pursuant to s 75-15(1) of the IPS that the Liquidator call a meeting.
On 19 June 2019, the Liquidator responded by letter to the requests for him to call a meeting. The Liquidator relevantly expressed the following:
Pursuant to section 75-250 Insolvency Practice Schedule (Corporations) at Schedule 2, and whether or not your request is reasonable having regard to the interests of other creditors of the company, I consider your request to be otherwise unreasonable for the reason that there is not sufficient available property to comply with your request.
Although the Liquidator’s letter referred to the IPS, he was apparently referring to a particular provision of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR), which are made under s 105-1 of the IPS. Rule 75-250 of the IPR provides as follows:
75-250 Directions to external administrator to convene a meeting—when reasonable and not reasonable
(1) This section is made for the purposes of section 75-15 of the Insolvency Practice Schedule (Corporations).
Unreasonable directions
(2)A direction to the external administrator of a company to convene a meeting of the creditors is not reasonable if the external administrator, acting in good faith, is of the opinion that:
(a) complying with the direction would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighs the benefits of complying with the direction; or
(b) there is not sufficient available property to comply with the direction; or
(c) a meeting of the creditors dealing with the same matters covered by the direction has already been held, or would be held within 15 business days after the direction is made; or
(d) the direction for the meeting is vexatious.
(3) Without limiting paragraph (2)(d), a direction may be taken to be vexatious if it is given within 20 business days after a similar direction was given.
Reasonable directions
(4) A direction to the external administrator to convene a meeting of the creditors is reasonable if subsection (2) does not apply to the direction.
(5) Despite paragraph (2)(b) or (c), a direction to the external administrator of a company to convene a meeting is also reasonable if:
(a) the creditors agree to bear the cost of complying with the direction; and
(b) if required to do so by the external administrator—security for the cost of complying with the direction is given to the external administrator before the meeting is convened.
On 19 June 2019, Mr Luntz emailed the Liqudiator and offered that the New Modscape Group would to pay at least $10,000 into the Liquidator’s trust account so that he would call the meeting.
On 20 June 2019, Mr Luntz forwarded letters from the third plaintiff, Modulair Pty Ltd, fourth plaintiff, Alfie Fire Services Pty Ltd, and sixth plaintiff, Mr Dan Larkey, in the Membership Proceeding requesting under s 75-15 of the IPS that the Liquidator call a meeting.
On 24 June 2019, Mr Luntz forwarded letters from the seventh plaintiff, Mr Stefan Seketa, and eighth plaintiff, Ms Jan Gyrn, in the Membership Proceeding requesting under s 75-15 of the IPS that the Liquidator call a meeting.
On 26 June 2019, the Supreme Court Proceeding was brought on for directions at the request of the Liquidator. During the directions hearing, there was discussion about the possibility of the Liquidator bringing an application under s 90-15 of the IPS seeking orders in relation to the requested meeting.
On the same day, after the directions hearing, the solicitors for the Relevant Creditors wrote to the then solicitor for the Liquidator and expressed that, should the Liqudiator not take certain steps by 4pm on 28 June 2019, the Relevant Creditors would apply for an order that the Liqudiator be compelled to call the meeting.
On 3 July 2019, the Liquidator’s then solicitor responded to that letter, expressing that the Liquidator’s opinion remained that the request for a meeting was unreasonable because, in accordance with the terms of r 75-250(2)(a) of the IPR, “complying with the direction would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighs the benefits of complying with the direction”.
Commencement of the Meeting Proceeding
The Relevant Creditors commenced the Meeting Proceeding on 9 July 2019. As foreshadowed, the Relevant Creditors sought an order in accordance with s 75-15 of the IPS requiring the Liquidator to convene a meeting of the Company. The plaintiffs and the Liquidator subsequently filed affidavit material and written submissions in relation to orders sought by the plaintiffs.
A Registrar of the Court heard the plaintiff’s interlocutory process on 19 November 2019. At the end of the hearing, he made the following orders (Registrar’s Orders):
1. Pursuant to section 90-15 of the Insolvency Practice Schedule to the Corporations Act 2001 (Cth), the defendant is directed to convene a meeting of the creditors of ACN 122 909 040 Pty Ltd (in liquidation) by no later than 13 December 2019.
2. In order to facilitate the meeting of creditors referred to in paragraph 1, the plaintiffs pay the sum of $20,000 into the defendant’s trust account [] by Friday, 22 November 2019.
3. The defendant pay the plaintiffs’ costs of and incidental to the originating process dated 9 July 2019.
On 2 December 2019, the Liquidator lodged an interlocutory application seeking review of the Registrar’s Orders pursuant to s 35A(5) of the Federal Court of Australia 1976 (Cth).
On 3 December 2019, the parties again come before the Registrar. It appears from the transcript that there was dispute about the effect of the Registrar’s Orders (including in relation to the meaning of “convene” in paragraph one of those orders). Towards the end of the hearing, the Registrar relevantly expressed the following:
I’ve now seen the interlocutory application that has been filed seeking a review of my orders made on 19 November. That precludes me making any fresh or varying orders in respect of the orders I made on the 19th; however, it doesn’t preclude me pronouncing what was the intention, and in my view effect, of the orders I made on the last occasion. And, for the transcript, I will repeat what I’ve said and make it clear that, in my view, it was a common intention shared by not only the parties through their counsel but by me that the orders made and sought by the plaintiff and agreed to, save as to costs, by the defendant was that the meeting of creditors of the company now known as ACN 122 909 040 Proprietary Limited be called and held by no later than 13 December. That is the intent and effect of the orders I made on that occasion.
On 4 December 2019, the Relevant Creditors filed their own interlocutory application. The application relevantly sought the following orders:
(a)an order dismissing the Liquidator’s interlocutory application dated 2 December 2019 on the grounds it is an abuse of process;
(b)an interlocutory order (until further order of the Court) restraining the Liquidator dealing with or disposing of any assets or property of the Company and assigning any right to sue that is conferred on him in his capacity as the external administrator of the Company;
(c)an order that for the purposes of the orderly conduct of the meeting ordered by the Registrar, the creditors of the Company other than RSAM Investment Trust be entitled no vote in number and in proportion to amounts recorded in the Liquidators report to creditors dated 1 May 2019.
Primary judge’s decision
On 5 December 2019, the primary judge, as Commercial & Corporations Duty Judge, heard the Liquidator’s interlocutory application dated 2 December 2019 and the Relevant Creditor’s interlocutory application dated 4 December 2019. At the end of the hearing, the primary judge made the following orders:
1. The interlocutory application made by the defendant dated 2 December 2019 be dismissed.
2. Pursuant to section 1324 of the Corporations Act 2001 (Cth) and/or section 90-15 of Schedule 2 Insolvency Practice Schedule (Corporations) of the Corporations Act 2001 (IPS) and/or the Court’s inherent and accrued jurisdiction restraining the defendant by himself, his servants or agents or howsoever from:
(a) dealing with or disposing of any assets or property of ACN 122 909 040 Pty Ltd (In Liquidation) (ACN 122 909 040) (Company); and
(b) assigning any right to sue that is conferred on him in his capacity as the external administrator of the Company,
so as to maintain the status quo of the liquidation of the Company until further order of the Court.
3. The date of 13 December 2019 in paragraph 1 of the order made by [the Registrar] on 19 November 2019 be substituted with the date of 17 December 2019.
4. An order pursuant to section 90-15 of the IPS and/or section 35A (6) of the Federal Court Act 1976 (Cth) that for the purposes of the orderly conduct of the meeting ordered by [the Registrar] on 19 November 2019, the creditors other than RSAM Investment Trust shall be entitled to vote in number and in proportion to the amounts as recorded in Schedule A of the defendant's report to creditors dated 1 May 2019.
5. The defendant pay the plaintiffs’ costs of and incidental:
5.1.1 to the plaintiffs’ interlocutory application dated 4 December 2019;
5.1.2 the defendant’s interlocutory application dated 2 December 2019; and
5.1.3 the hearing before [the Registrar] on 3 December 2019.
The primary judge provided ex tempore reasons for these orders at the hearing. The transcript records those reasons as follows:
I have before me this morning, two interlocutory applications: one brought by Mr Caspaney in his capacity as liquidator of ACN 122 909 040 Proprietary Limited, for orders, among other things, that an order made by [the Registrar] on 19 November 2019 be set aside. When the matter was called on this morning, Mr Berger of counsel, who appeared for the applicant, did not seek to rely on any evidence or written submission in support of the application. In my view, the reasons that Mr Berger advanced for effectively adjourning the hearing of this application to enable the applicant to put on evidence and submissions about the application are wholly unpersuasive.
I would accordingly dismiss the applicant’s interlocutory application dated 2 December 2019. Modscape Holdings Proprietary Limited is a creditor of the company in liquidation. It brings its own interlocutory application dated 4 December 2019 in which, apart from seeking an order that the liquidator’s interlocutory application be dismissed, seeks the following orders:
(1)An interlocutory order pursuant to section 1234 of the Corporations Act 2011 (Commonwealth) and/or section 90-15 of the IPS and/or the court’s inherent and accrued jurisdiction restraining the defendant liquidator by himself, his servants or agents or howsoever from:
(i)dealing with or disposing of any assets or property of ACN 122 909 404 Proprietary Limited (In Liquidation) (“the company:); and
(ii)assigning right to sue that is conferred on him in his capacity as the external administrator of the company so as to maintain a status quo of the liquidation of the company until further order of the court.
(2)An order pursuant to section 90-15 of the IPS or section 35A subsection (6) of the Federal Court Act that for the purposes of the orderly conduct of the meeting ordered by [the Registrar] on 19 November 2019 the creditors other than RSAM Investment Trust shall be entitled to vote in number and in proportion to the amounts as recorded in schedule A of the defendant’s report to creditors dated 1 May 2019.
(3)The defendant pay the plaintiff’s costs of and incidental to this application.
In my view, for the reasons that Mr Wilson advanced in his submissions, which will be recorded in the transcript, the making of those orders is appropriate in all the circumstances and I will make them, together with an order varying the order made by [the Registrar] on 19 November 2019 substituting 17 December 2019 for 13 December 2019 in order (1) of the registrar’s orders of that date.
After further discussion with the parties, the primary judge amended the order as to costs such that it reflected the fifth order extracted above at [26].
On 6 December 2019, the Liquidator filed a notice informing the Court of a change of lawyer. His new solicitors from that date are Rothwell Lawyers.
Liquidator’s Applications
On 13 December 2019, the Liquidator’s solicitors informed my chambers of their intent to file the Liquidator’s Applications on behalf of their client. The solicitors requested that those application be heard on 16 December 2019.
The interlocutory application in the Meeting Proceeding sought the following orders:
1.The date in paragraph 3 of the order of [the Primary Judge] made on 5 December 2019 be extended to a date to be fixed or until further order.
2.Pursuant to rule 39.05 of the Federal Court Rules 2011, paragraph 4 of the order of [the Primary Judge] made on 5 December 2019 be varied to read as follows:
Pursuant to section 90-15 of the IPS and/or section 35A(6) of the Federal Court of Australia Act 1976 (Cth), for the purposes of the orderly conduct of the meeting ordered by [the Registrar] on 19 November 2019, each of the creditors other than RSAM Investment Trust (who shall not be entitled to vote at the meeting) shall be entitled, in accordance with rule 75-85(2) of the Insolvency Practice Rules (Corporations) 2016, to one vote.
3.The Plaintiffs pay the Defendant’s costs of and incidental to this application.
The application in the Appeal Proceeding for leave to appeal the Primary Judge’s Orders specified one proposed ground of appeal as follows:
1.The learned primary judge erred in ordering that the creditors of ACN 122 909 040 Pty Ltd (in liq) other than RSAM Investment Trust shall be entitled to vote at the meeting of creditors ordered by [the Registrar] on 19 November 2019 in number and in proportion to the amounts as recorded in Schedule A of the defendant’s report to creditors dated 1 May 2019, in that such order was contrary [to] rule 75-85(2) of the Insolvency Practice Rules (Corporations) 2016.
For reference, r 75-85 of the IPR, as referred to both the Liquidator’s Applications, provides the following:
75-85 Entitlement to vote at meetings of creditors
(1) A person other than a creditor (or the creditor’s proxy or attorney) is not entitled to vote at a meeting of creditors.
(2) Subject to subsections (3), (4) and (5), each creditor is entitled to vote and has one vote.
(3) A person is not entitled to vote as a creditor at a meeting of creditors unless:
(a) his or her debt or claim has been admitted wholly or in part by the external administrator; or
(b) he or she has lodged, with the person presiding at the meeting, or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim:
(i) those particulars; or
(ii) if required—a formal proof of the debt or claim.
(4) A creditor must not vote in respect of:
(a) an unliquidated debt; or
(b) a contingent debt; or
(c) an unliquidated or a contingent claim; or
(d) a debt the value of which is not established;
unless a just estimate of its value has been made.
(5) A creditor must not vote in respect of a debt or a claim on or secured by a bill of exchange, a promissory note or any other negotiable instrument or security held by the creditor unless he or she is willing to do the following:
(a) treat the liability to him or her on the instrument or security of a person covered by subsection (6) as a security in his or her hands;
(b) estimate its value;
(c) for the purposes of voting (but not for the purposes of dividend), to deduct it from his or her debt or claim.
(6) A person is covered by this subsection if:
(a) the person’s liability is a debt or a claim on, or secured by, a bill of exchange, a promissory note or any other negotiable instrument or security held by the creditor; and
(b) the person is either liable to the company directly, or may be liable to the company on the default of another person with respect to the liability; and
(c) the person is not an insolvent under administration or a person against whom a winding up order is in force.
Pursuant to my directions on 13 December 2019, the parties filed written outline of submissions yesterday morning prior to the hearing.
I heard the applications yesterday morning, on 16 December 2019. An application was made by Ms Slocum of counsel to intervene on behalf of C&L International Holdings Pty Ltd (C&L), a separate creditor of the Company, in support of the Liquidator’s Applications. I refused the application to intervene on the basis that C&L had no separate interest than would have otherwise be dealt with by Mr Gilbertson QC on behalf of the Liquidator.
Relevant principles
Amendment of orders of the Court
The Liquidator seeks the variation of the Primary Judge’s Orders pursuant to r 39.05 of the Federal Court Rules 2011 (Cth) (CourtRules). That rule provides the following:
39.05 Varying or setting aside judgment or order after it has been entered
The Court may vary or set aside a judgment or order after it has been entered if:
(a) it was made in the absence of a party; or
(b) it was obtained by fraud; or
(c) it is interlocutory; or
(d) it is an injunction or for the appointment of a receiver; or
(e) it does not reflect the intention of the Court; or
(f) the party in whose favour it was made consents; or
(g) there is a clerical mistake in a judgment or order; or
(h)there is an error arising in a judgment or order from an accidental slip or omission.
Leave to appeal
The Primary Judge’s Orders were interlocutory in nature. As such, an appeal cannot be brought from those orders unless the Court or a Judge of the Court grants leave: ss 24(1A) and 25(2) of the Federal Court of Australia Act 1976 (Cth).
The Liquidator must satisfy the criteria identified by the Full Court in Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; 33 FCR 397 at 398 (Decor), namely that:
(a)in all the circumstances, the decision of first instance is attended by sufficient doubt to warrant reconsideration by the Full Court; and
(b)substantial injustice would result if leave were refused, supposing the decision to be wrong.
Consideration
The Liquidator seeks an amendment to paragraph 4 of the Primary Judge’s Orders, and alternatively argues that the correctness of that order is attended with sufficient doubt to warrant reconsideration by the Full Court. For reference, paragraph 4 of the Primary Judge’s Orders provided the following:
4. An order pursuant to section 90-15 of the IPS and/or section 35A (6) of the Federal Court Act 1976 (Cth) that for the purposes of the orderly conduct of the meeting ordered by [the Registrar] on 19 November 2019, the creditors other than RSAM Investment Trust shall be entitled to vote in number and in proportion to the amounts as recorded in Schedule A of the defendant's report to creditors dated 1 May 2019.
Contrary to the Liquidator’s submission, paragraph 4 of the Primary Judge’s Orders is not inconsistent with r 75-85(2) of the IPR, which relevantly provides that “each creditor is entitled to vote and has one vote” (emphasis added).
When r 75-85(2) speaks of a creditor having “one vote”, it is not referring to the weight of the vote for the purposes of a resolution. In other words, its effect is not that each qualifying creditor has a vote of equal weight. The effect of r 75-85(2), in stating that “each creditor … has one vote”, is that a creditor can vote once in respect of the resolution.
The weight of the creditor’s vote may instead be discerned from r 75-115 of the IPR, which provides the following:
75-115When a resolution is passed at a meeting of creditors after a poll is demanded
(1) A resolution is passed at a meeting of creditors of a company if:
(a) a majority of the creditors voting (whether in person, by proxy or by attorney) vote in favour of the resolution; and
(b) a majority in value of the creditors voting (whether in person, by proxy or by attorney) vote in favour of the resolution.
(2) A resolution is not passed at a meeting of creditors of a company if:
(a) a majority of the creditors voting (whether in person, by proxy or by attorney) vote against the resolution; and
(b) a majority in value of the creditors voting (whether in person, by proxy or by attorney) vote against the resolution.
(3) Subject to subsection (7), if no result is reached under subsection (1) or (2) and the resolution does not relate to the remuneration or the removal of the external administrator of the company:
(a) the person presiding at the meeting may exercise a casting vote in favour of the resolution, in which case the resolution is passed; or
(b) the person presiding at the meeting may exercise a casting vote against the resolution, in which case the resolution is not passed; or
(c) if the person presiding at the meeting does not exercise a casting vote, the resolution is not passed.
(4) If no result is reached under subsection (1) or (2) and the resolution relates to remuneration, the resolution is not passed.
(5) If no result is reached under subsection (1) or (2) and the resolution relates to the removal of the external administrator of the company:
(a) the external administrator may exercise a casting vote in favour of the resolution, in which case the resolution is passed; or
(b) if paragraph (a) does not apply—the resolution is not passed.
(6) If no result is reached under subsection (1) or (2), and the meeting is not a meeting of eligible employee creditors, the person presiding at the meeting must:
(a) inform the meeting of the person’s reasons for exercising, or not exercising, as the case may be, a casting vote under subsection (3); and
(b) include those reasons in the minutes of the meeting.
(7) In the case of a meeting of eligible employee creditors mentioned in paragraph 444DA(2)(a) of the Act, if no result is reached under subsection (1) or (2), the resolution is not passed.
As can be seen from r 75-115(1), a resolution is, as a starting rule, passed when the majority of creditors vote in favour of the resolution and a majority in value of the creditors vote in favour of the resolution. In my view, the requirement in paragraph 4 of the Primary Judge’s Orders—that the relevant creditors “shall be is entitled to vote in number and in proportion” to certain amounts—reflects this mechanism. The relevant creditors are to vote in number (i.e. a vote of equal weight per creditor) and in proportion by value (which, according to the Primary Judge’s Orders, is to be determined by Schedule A of the Liquidator’s report to creditors dated 1 May 2019).
In accordance with r 75-110 of the IPR, this voting mechanism will be triggered if a poll is requested by either:
(a)the person presiding at the meeting; or
(b)a person participating and entitled to vote at the meeting.
For these reasons, my view is that there is no basis for varying the Primary Judge’s Orders pursuant to r 39.05 of the Court Rules. Nor is the Primary Judge’s Orders attended with sufficient doubt to warrant reconsideration by the Full Court.
For completeness, my view is that, in light of the past conduct of the Liquidator, who has sought to avoid conducting the creditor’s meeting at all cost, the Primary Judge’s Orders are appropriate for the orderly conduct or the meeting.
Conclusion
For the reasons expressed above, the Liquidator’s Applications are dismissed. The Liquidator will pay the Relevant Creditors’ costs of and incidental to those applications.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Anderson. Associate:
Dated: 17 December 2019
SCHEDULE OF PARTIES
VID 753 of 2019 Plaintiffs
Fourth Plaintiff:
ALFIE FIRE SERVICES PTY LTD (ACN 130 042 125)
Fifth Plaintiff:
NUNN BROS. HAULAGE PTY LTD (ACN 006 256 855)
Sixth Plaintiff:
DAN LARKEY
Seventh Plaintiff:
STEFAN SEKETA
Eighth Plaintiff:
JAN GYRN
VID 1354 of 2019 Respondents
Fourth Respondent:
ALFIE FIRE SERVICES PTY LTD (ACN 130 042 125)
Fifth Respondent:
NUNN BROS. HAULAGE PTY LTD (ACN 006 256 855)
Sixth Respondent:
DAN LARKEY
Seventh Respondent:
STEFAN SEKETA
Eighth Respondent:
JAN GYRN
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1
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