Nambucca Investments Pty Ltd v Snoco Ltd
[1999] NSWSC 211
•17 March 1999
CITATION: Nambucca Investments Pty Ltd v Snoco Ltd [1999] NSWSC 211 CURRENT JURISDICTION: Equity FILE NUMBER(S): 4546/98 HEARING DATE(S): 16/03/99; 17/03/99 JUDGMENT DATE:
17 March 1999PARTIES :
Nambucca Investments Pty Limited (P1)
Lawnkin Pty Limited (P2)
John Edward Star as liquidator of Nambucca Investments Pty Limited (P3)
John Edward Star as liquidator of Lawnkin Pty Limited (P4)
Snoco Limited (D1)
Equitable Investments Limited (D2)
Equitable Holdings Limited (D3)
Equitable Life Insurance Company Limited (D4)
Equitable General Insurance Company Limited (D5)
Equitable Insured Mortgages Limited (D6)
Equitable Securities Limited (D7)
Equitable Asset Management Limited (D8)
James Gordon Kearns (D9)JUDGMENT OF: Hamilton J
COUNSEL : M Ryckmans, solicitor (P3, P4) SOLICITORS: P A Somerset & Co (P3, P4) CATCHWORDS: CORPORATIONS [280] - Winding up - Liquidators - Rights and powers - In winding up by Court - Power to compromise claims - Whether preference payment debt requiring approval - Power to enter into agreement on behalf of company - Agreement to be performed more than three months after agreement entered into - Approval of Court - Basis on which granted. ACTS CITED: Corporations Law, ss 477(2A), 477(2B) CASES CITED: Corporate Affairs Commission v ASC Timber Pty Limited, 28 September 1998, NSWSC, Austin J, unreported
Re G A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308
Re Luxtrend Pty Ltd (in liq) [1997] 2 QdR 861; (1996) 14 ACLC 1786DECISION: Agreement approved.
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THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISIONHAMILTON J
WEDNESDAY, 17 MARCH 1999
4546/98 NAMBUCCA INVESTMENTS PTY LTD & ORS v SNOCO LIMITED & ORS
JUDGMENT
HIS HONOUR:
1 This is a motion in these proceedings by John Edward Star as liquidator of the two plaintiff companies for the approval by the Court of an agreement settling the proceedings. The proceedings were brought to set aside certain loan transactions as being voidable transactions within the meaning of Pt 5.7B of the Corporations Law. The amounts of the loans totalled $465,000 and the total amount, including interest, that could have been recovered was, at most, in the vicinity of $700,000. The liquidator was not in funds to conduct the proceedings and, obviously, there were risks in prosecuting them. After the statement of claim had been issued but little else done in the proceedings a settlement was negotiated which has been incorporated in a deed, a copy of which is annexed to the notice of motion. The operation of that deed is subject to the approval of the Court. The deed provides for the payment of $500,000 in settlement of the claims by an initial payment of $200,000 and six monthly payments of $50,000 each. The first payment has been made but is being held “in escrow” until the approval of the Court is given.2 The Corporations Law, by s 477(2A), requires the approval of the Court or of the committee of inspection or of a resolution of the creditors to the compromise by a liquidator of a debt of the company in excess of $20,000. That subsection, however, does not apply to this compromise, because a claim for the avoidance of preferential payments has been said not to be a debt within the meaning of the section: see the decision of Moynihan J in Re Luxtrend Pty Ltd (in liq) [1997] 2 QdR 861; (1996) 14 ACLC 1786, with which decision I respectfully agree.
3 However, s 477(2B) of the Corporations Law requires the approval of the Court or of the committee of inspection or of a resolution of the creditors to the entry by a liquidator into an agreement on the company's behalf if obligations of a party to the agreement may, according to the terms of agreement, be discharged by performance more than three months after the agreement is entered into. Whilst that subsection does not specifically refer to settlement or compromise of proceedings, the liquidator takes the view, and in my view correctly, that this agreement of compromise is an agreement that falls within that subsection. The principles by which approval should be given under s 477(2B) have been discussed in this Court by Young J in Re G A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308. The agreement in that case was quite unlike the agreement in the present case. His Honour emphasised that approval should be granted only to transactions which were designed as steps in the winding up of the company rather than, for instance, allowing the company to carry on business or have some ongoing existence. His Honour said (at 311):
That decision was approved and the history of the subsection discussed in Corporate Affairs Commission v ASC Timber Pty Limited 28 September 1998, NSWSC, Austin J, unreported. I am of the view that the transaction of compromise is a sensible and advantageous one for the company, although that view of mine is actually irrelevant to the task that I have to perform. It is entirely clear to me that the transaction is really for the proper realisation of the assets of the company and assists its winding up and, in those circumstances, the Court's approval of the transaction ought be granted.
“If the court can see that the transaction that is to inure past three months is really for the proper realisation of the assets of the company or assists its winding up, then the leave should be granted.”
4 The orders of the Court will therefore be that the Court:
1 Approves the entry of John Edward Star as liquidator of the first plaintiff and the second plaintiff into the deed of settlement a copy of which is annexed to John Edward Star's notice of motion dated 16 March 1999.
2 Orders that the costs of the motion be paid out of the proceeds received under the said deed of settlement.
3 Grants to the plaintiffs leave to discontinue their claims against the fourth to eighth defendants inclusive with no order as to costs.
4 Reserves liberty to restore the proceedings to the list on three days’ notice.
…o0o…
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