Morgan v McMillan Investment Holdings Pty Ltd

The appeal concerned a pooling order made under section 579E(1) of the *Corporations Act 2001* (Cth). The parties were Mr Morgan, the liquidator of Sydney Allen Printers Pty Ltd (SAP) and Sydney Allen Manufacturing Pty Ltd (SAM), and McMillan Investment Holdings Pty Ltd (MIH), a secured creditor of SAP and SAM. The Australian Securities and Investments Commission (ASIC) was also a respondent, submitting to the Court's order. The dispute arose from Mr Morgan's assertion that a pooling order should be made to wind up SAP and SAM as if they were a single company, which MIH opposed.

The central legal issue before the High Court was whether the "gateway requirement" in section 579E(1)(b)(iv) of the *Corporations Act* was satisfied. This required the Court to determine if an alleged chose in action, arising from a sale agreement for the disposal of the companies' joint business, constituted "particular property used, or for use, in connection with a joint business, scheme or undertaking" of SAP and SAM. The Court also considered whether this chose in action was "used or available for use by two or more companies" and whether it had a "sufficient connection" to the undertaking or carrying out of their joint business. A further question was whether the reinstatement of SAM after its deregistration, under section 601AH(5) of the *Corporations Act*, deemed it to have undertaken activities during the period of its deregistration.

The High Court reasoned that the purpose of pooling orders is to improve outcomes for unsecured creditors by consolidating the assets and liabilities of related companies wound up in insolvency. However, the gateway requirement in section 579E(1)(b)(iv) imposes a condition that the property in question must have a sufficient connection to the joint business, scheme, or undertaking. The Court found that while SAP and SAM had conducted a joint business, they did not incur joint liability for debt or have joint ownership or operation of property in that business. The alleged chose in action, arising from the disposal of the business, was merely a potential future enforcement right and did not possess the required connection to the previously conducted joint business. Furthermore, the Court held that the retrospective effect of section 601AH(5) upon SAM's reinstatement did not deem it to have held property or carried on a joint business during its deregistration period.

Consequently, the High Court dismissed the appeal. The Court ordered that Mr Morgan pay the costs of the appeal.