Mulvaney v Rob Wintulich Pty Ltd

[1995] FCA 1193

13/02 2001 TUB 07:47 WAX 81 8 IZU54a28 SAUN L18NAKY	LWuVLi,vur
- .

1/73 75

DRAFT mG- JlJDGMENT No. ..,........ ,.,,,,,/ ,,,,,..,,,,.

COZIRT OF AUSTlULU

Matter Na SG 3184 of 1995

By O'LOUGJZIN J

MKLYleWY V WINTUUCH

ADELAIDE, 29 SEPTEMBER 1995

HIS HONOUR: 1 have before me an urgent application in the matter of

Wibfich Pty Limited which I will hmin after refer to as, "the 'company. "

I order that tbe b e for service of the application be abridged. The

subsKancive orden sought in tlle appUeadon js rhat each of the respondents.

being Rob Winruljch Pty Limited, Trcbor Pry Limited, Waltcr

W i f i c h and the &cite of Thelma Lillian Wmtulich, do and be

commanded to carry out rheir obligations pursuant to the terms of the deed

company m g e m e n t referred a, in the affkbviir of Bruce Neil Mulvaney

sworn the 27th day of Scptcmber 1995.

. .

I turn to' the affidavit of Ivlr Mulvaney in which he states Um he is a

chartered accounmr and that on 4 July 1995 rhe directors of &c company

appohced him as adminisaor to its a f f a k pursuant to pm 5.3(a) of the

Corporations Law. The report of the directors showed an e a a t e d

deficiency of ~400,000. Meetings of credirors as required paxt 5.3(a) of

the Corporations Law have been held and at that second m* a draft

deed of campany arrangement was presented to the creditors. It will be

nsccssary for me shortly to refer to the specific term of the deed of

company arrangement. For the moment I will continue, however,	to
outline the results of rhe meeting.

RECEIVED 13-FEB-2001 0 8 : Z S FROM-61 B 8 2 0 5 4 4 2 6 TO-FEDERAL COURT AUST P PAGE 0 0 2

A reso1ution was moved and seconded and accept& by the suffiuenr: rns jd ty of the creditors that the company execute a deed of company

axmgement the terms of which are to reflea rhe heintern of the draft deed of

company arrangement &led at this m e e m . One of rhe &S of the deed

of company anaogement, claus~ 3(b)(i) is conM to aad indeed tha cause

of the application before the court. Shortly stated it requires a l l of the

1

shareholders of the company to aansfer their sham for a nominal

l

l	cbnsrderarion of a total of $1 m the admWmator or as he may direm. As I
l
understand it the purpose behind this is to accommodate a group of
investors, who intcnd to endeavour to get che company back on its feet, so
l
to speak, and to trade out of its ~ c u l l t i e s .
l	I accept Tar the purpose of thwo roasons that the concept of the

=

i	shareholders so disposing of theis shares was placed before the meeting and
l
l	accepted as a term of the deed of company k g e m e n t by the rnccting of c d t o n . Arguments have now arisen within the ranks of the
shareholders. Mx John Wintulich and those who me w i t h his p u p are
inten* to comply with t& spiri t of clause 3@) of the deed of company
arrangement. m mbert Winmlich, the brother of rohn wintunch, anothcr . .
director of the company and those within his group are now claiming chat
they never intended to be consenting paths in the terms contemplated by
clause 3@).
It is of course impossible for me to investigate which of these versions of

RECEIVED 13-FEB-2001 08:ZB FROM-61 8 82054426 TO-FEDERAL COURT AUST P PAGE 003

competing facts is the correct version. Nwertheless for the reasons which

I will mention I inrend to proceed upon the premise that Mr Roberr

Wintulich and rhose within his p u p of shareholders were consciously

involved in the tenns of the deed of company arrangement for the purposes I'

of asscssiq what ff any orders could be made in those cimunstanccs. Part

5.3(a) of the Corporations l a w is, relatively speaking, new. Many of its

provisions have yet to be tested. The pareicular provision upon vhich the

applicant, m Mulvaney, in big capacity as admiai~mtor of rhe ccmpauy,

is relying, f s secdon. 4446 of the Co~porations Law. It is entitled. "ER&

of dccd on company officers and members, and it S~~IOS:

Deed of company arrnngemeni also 'binds. (a), the compmry and,

(b), irs offccrs rmd members R&, (c), r k deed's adncinistTami.

Arguably that section, if =ad literally, would mean rhar the deed would

have a bincling effect upon the shareholders of the company including thc

senhent shareholders and absent shareholders who were unaware of and had

no p m to play in rhb compilation and the presentation d the deed of

company arrangement. That interpretation, rhe so-called literal . .

interpretation, musr however be assessed by havhz regard to the totality of

p m 5.3(a) and by considering tbc answer to the question; what is it to

which p m 5,3(a) is directed?	That answer in part is found in section 435A
which states:

RECEIVED 13-FEE-2001 09:ZB FROM-61 8 8 2 0 5 4 4 2 6 TO-FEDERAL COURT AUST P PAGE 004

2R.e objecc Mche pan is ro provide&; the business pmpeny and

afa'rs of an insolvenr company ro be acbninissered in a wcry rkar,

(a), madmist& the chrmces of the company or as much possible

of irr buriness cam'nnrting in en'srence, or, (a), if it% nor possible

for rh.e company or irs bushes m continue in exisreme, resvlrs in a

bemr remm f i r the company's crcdirors and members rhan would

reslrltfvom m immediae wi&ng up of she company.

There, in additidn to section 4440 is a reierence to the members of the

company. Another reference to which Mx Willdnson, counsel for the

a$plicant, xefemd, is to be found in schedule 8A of the regu.latious h

paagmph 2, sub-paragraph @)(c). That pafagraphs srates rhar:

2% powers of rhe adnatrdmaror include the power to enter imo amZ

compkre'mry comaafor rhe -Pa. of sizares tn rke cumpmrv.

It would therefom S& that to a certain degree - and the question is the

extent of that degree - members are to be bound by the terms of a d+ of

arrangement even though the very narure . of . a deed of anangement is one

between the company and fundamentdly i ts creditors to deviate it from

the burdcns of its insolvency.

I come back then to the ckcal question: how i s section 444G W be

interpreted? Is it to be interpreted literally so that a dissenrfng or absent

RECEIVED 13-FEB-2001 0 Q : Z S FROM-51 8 82054425 TO-FEDERAL COURT AUST P PAGE 005

shareholder finds himself or herself bound by the terms of the deed of

company arrangement. In my opinion the sramtory enactment to the effect

that a deed of company arrangemenr binds rbe members of a company

cannot be read in this 1itc.d fashion. It must be read with some measure

of consxaine. It cannot, in m y opinion, main, for example, char a

m

dissenting shareholder can be forced to do something to his or her

detriment. It cannot: in my opinion, mean that his or her shares can be

,

c o ~ ~ c a r ~ for no consl:dwadon or for no adequate consideration.

In my opinion its m e a d 6 must be limited to a.foxm of n%&t which

prescribes conduct on the part of the shareholder which in normal

circumstauces would be permissible, but which is now prevenred because it

i s contsaq to or countcx-pmductive of the terms of the deed of company

anangement. Examples that come to miad could extend to resuaints on

voting rights, restrainrs on transfers of shares if far some sound reason

those rights might be subject to campcting tonns of a deed of compmy

arrangement, but I do not think that the deed and its contents can be used

in the manner in which the parties would wish me to order its use today.

I have assumed rhat Mr Robert WinruLiFh and those within his group did agree to participate in thc manner that has been suggested by rhe applicants. That does not however, short of their signature h an appropriate fashion, mean &at they are bound by the. terms of the deed. fi

may mean chat they have cornmined a bmch of some contmct for which

RECEIVED 13-FEE-ZOO1 0 8 : 2 8 TO-FEDERAL COURT AUST P PAGE 0 0 6

they may be liable in damages. I express no opinion on that other thm to

say that it is not a cause which is beiore me today nor is it one upon which

I can express any comment.

i	Yesterday during the course of submissions Mt Wilkinsoa pointcd that
there were dedlded advantages to the shareholders in participating in the
deed of company arrangement. H e mentioned the fact that m s
given'by Mr lohn Winrulich and Mr Roberr. WIndicb would be disckuged
in return for the participation in the' deed of company amngement. As I
understand it tho cwmts of today could mean that those deeds of guarantee
will not now be discharged. A@n tbat could give rir;e m &other cause of
acrion but ir is not a matter upon which I can express any concluded view.
My view is limited to the purpose and effed'of section 4440 of the
Corpomtions Law. Insofar as it claims chat ir b.Ms tbe members of thc
company X do not consjdcr that it is to be inteqmtcd as binding members

. . .

to gansfcr their shares for virtually no consideration agaiast their will.

Thst concludes my ieasons.

' RECORDED : NOT TRANSCRTBED

=S HONOUR: I order that the applicant pay the respondent's costs to be

taxed in default of agreement.

RECEIVED 13-FEB-2001 0 8 : l 8 FROM-61 8 U2054426 TO-FEDERAL COURT AUST P PAGE 0 0 7