Morrison v Geofusion Holdings Pty Ltd
[2000] VSC 331
•11 August 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL & EQUITY DIVISION CORPORATIONS LIST | Not Restricted |
No. 6256 of 2000
| MICHAEL JOSEPH MORRISON | Plaintiff |
| v | |
| GEOFUSION HOLDINGS PTY LTD & ORS | Defendants |
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JUDGE: | Warren J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 August 2000 | |
DATE OF JUDGMENT: | 11 August 2000 | |
CASE MAY BE CITED AS: | In the Matter of Geofusion Holdings Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 331 | |
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Receiver – insolvent companies – appointment of administrator opposed – appointment of receiver sought.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr S. Wotherspoon | White SW Computer Law |
| For the Fifth, Sixth, Seventh and Eighth Defendants | Mr P. Crutchfield | Arnold Bloch Leibler |
HER HONOUR:
In this matter the plaintiff has issued oppression proceedings by way of originating process under s.246AA of the Corporations Law seeking the appointment of a receiver and manager of property of the first to fourth defendants whom I will generally refer to as the "Geofusion companies."
In addition to the originating process the plaintiff filed at the same time (and without order of the court) a statement of claim. In summary, the plaintiff alleged that he entered into an agreement with the fifth to seventh defendants on 16 March 1999 to form the Geofusion companies. The companies were to be used as the corporate vehicles for the development and exploitation of certain intellectual property. The intellectual property involved the transformation of certain non-viable waste materials into commercially viable products similar to concrete. The plaintiff and the fifth to seventh defendants were to be directors and have equal holdings in the units of the Geofusion companies. In September 1999 the eighth defendant was appointed a director of the Geofusion companies. The plaintiff alleges that the agreement between he and the fifth to seventh defendants was breached by the disclosure of confidential information by the fifth to eighth defendants to a third party and that the companies have suffered loss and damage as a consequence. Accordingly, the plaintiff seeks the appointment of a receiver of the Geofusion companies. He does not seek relief against the fifth to eighth defendants.
It transpires that at the time or about the time that the originating process was issued together with a statement of claim on 28 July 2000, a meeting had been convened of directors of the Geofusion companies to discuss the position of the companies and to determine their future. The directors were to consider the appointment of an administrator of the Geofusion companies. The plaintiff, a director and unit holder of the companies objected to the appointment of an administrator.
As a result of the convening of the meeting discussions occurred prior to and during the actual meeting. The plaintiff's solicitor was present. It seems, arising from matters deposed to by the solicitor for the fifth to eighth defendants, Mr Leon Zwier, that after the meeting commenced it was adjourned to enable discussions to occur. During the adjournment of the meeting, a period of over one hour, the plaintiff appears to have filed the originating process and the statement of claim. Shortly before resumption of the meeting on 28 July 2000, the directors became aware that the originating process had been filed by the plaintiff.
The plaintiff's solicitor served the originating process and the statement of claim upon the fifth to eighth defendants before they resumed the meeting. The directors resumed the meeting and resolved the Geofusion companies were insolvent or likely to become insolvent and appointed administrators pursuant to s.436A of the Corporations Law. The plaintiff opposed the resolutions. He has not, to date, articulated any challenge to the insolvency of the companies or the appointment of the administrators. In an affidavit sworn on behalf of the fifth to eighth defendants by Mr Zwier on 10 August 2000, these matters in relation to the meeting on 28 July 2000 are described.
The matters deposed to by Mr Zwier are not rebutted by way of affidavit on behalf of the plaintiff. Furthermore, no indication was given to the Court that the matters deposed to by Mr Zwier were disputed by the plaintiff.
The matter comes before me and the plaintiff seeks to have the matter adjourned for a period of approximately 14 days because since the date of the issue of the originating process and the appointment of the administrator at the meeting some 14 days ago the attitude of the administrators to the proceeding remains unknown.
Once the administrators were appointed on 28 July 2000 the proceeding filed immediately beforehand was stayed pursuant to s.444D(1) of the Corporations Law. There was no evidence before me to show the efforts, if any, made by the plaintiff to obtain the consent of the administrators. Furthermore, there was no application before me seeking leave of the court to continue the proceeding.
I observe also that there is no application or proceeding before me seeking removal of the administrators and indeed, no issue has been put before the court to challenge the bona fides or suitability of the administrators appointed.
In addition, I observe that the proceeding having been issued some two weeks ago, no attempt was made to obtain the consent of the administrator to the proceeding being continued against the Geofusion companies.
The fifth to eighth defendants seek summary dismissal of the proceeding against the fifth to eighth defendants as an abuse of process pursuant to Rule 23.01 of Chapter 1 of the Rules on the ground that it does not disclose a cause of action.
I consider that ultimately the issue comes down to a question of an insolvency. The fact of insolvency is not challenged by the plaintiff in his statement of claim. Be that as it may the principles are clear in the Corporations Law as to the provisions where a company is insolvent. In the absence of evidence to the contrary, the resolution of the directors that the companies are insolvent must be acted upon and the Law applied.
These matters were set out conveniently and succinctly by His Honour Justice Mandie in the unreported judgment of In Re: Avonwood Homes Pty Ltd, delivered 5 May 2000. In that judgment His Honour set out at paragraphs 7 and 8 the role of the Corporations Law and the appropriate course to be adopted where there is insolvency:
(7) With regard to that, as I say, I cannot see why a receiver would be any more advantageous than an administrator under the relevant provisions of the Corporations Law, or a liquidator. It seems to me that before the court exercises the power to appoint a receiver, it should be persuaded that there is no reasonable or satisfactory alternative. Parliament has made provision in the Corporations Law primarily for two methods of dealing with insolvent companies. There is the method of administration under Part 5.3A and then there is the method of administration by way of winding-up.
(8) Both of those statutory avenues have built-in protections for the company and for unsecured creditors and their equality of treatment. On the other hand, if a receiver is appointed, many of those protections do not apply. There is no moratorium on action against the companies."
In essence His Honour's view can be expressed thus: that it is inappropriate to appoint a receiver where insolvency has arisen and the appropriate provisions of the Corporations Law should be brought into play. I would respectfully adopt His Honour's observations.
In the context of applying those observations to this matter I consider that the proceedings are now otiose, if not an abuse of process and ought be dismissed for the very reason that an administrator, having been appointed and the company being insolvent, then it is inappropriate under the Corporations Law to continue to appoint or seek to appoint a receiver. Furthermore, the statement of claim does not disclose any cause of action against the fifth to eighth defendants.
If it transpires that the plaintiff or indeed the administrators wish to adopt other courses then that is a matter for them. It is not a position where the court should be used to obtain tactical advantage on the part of one party or another. That of itself, in my view, would constitute an abuse of process. In any event the proceeding no longer serves any purpose.
On balance and for the reasons expressed by His Honour Justice Mandie In Re: Avonwood Homes Pty Ltd I consider that the proceeding should be dismissed.
The observation should be made that an application was made orally on behalf of the plaintiff on two bases this morning: first, to have the further determination of the proceeding adjourned for 14 days to enable the attitude of the administrators to be ascertained.
Second, an oral application was made in any event seeking to have the defendants' summons adjourned also for a period of some days to enable the plaintiff to consider his position.
I observe that it was submitted by Mr S. Wotherspoon for the plaintiff, that in light of the appointment of an administrator, the plaintiff may wish to replead his cause of action. It was said the claim would change from one based in oppression alone and be expanded to include a direct claim against the directors of the Geofusion companies, the fifth to eighth defendants in the proceeding. The new claim, it was submitted, would fall within the exception to the rule in Foss v Harbottle (1843) 2 Hare 461; 67 E.R. 189. Presumably, the cause of action foreshadowed was a reference to the recent amendments to ss.236 and 237 of the Corporations Law (effective 13 March 2000). Mr Wotherspoon did not explain the basis of the foreshadowed amendment, save to say that the claim would be against the fifth to eighth defendants and that the Geofusion companies would be joined for formal reasons only.
In my view, the adjournment would be a waste of time as the whole proceeding in light of the appointment of the administrator and the provisions of the Corporations Law, is misconceived.
In those circumstances, therefore, the usual principles to be applied with respect to an application for an adjournment are not relevant. Hence I will order that the proceeding is dismissed.
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CERTIFICATE
I certify that this and the 4 preceding pages are a true copy of the reasons for judgment of Warren J of the Supreme Court of Victoria delivered on 11 August 2000.
DATED: this eleventh day of August 2000.
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