National Australia Bank v King - [2003] NSWSC 525

Reported Decision:
(2003) 45 ACSR 413

Supreme Court

CITATION: National Australia Bank v King [2003] NSWSC 525

HEARING DATE(S): 13/06/03

JUDGMENT DATE:
18 June 2003

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Direction that notice of application be given to administrator. Application adjourned.

CATCHWORDS: CORPORATIONS - voluntary administration - certain debts of company guaranteed by directors - application by creditor for leave to enforce guarantees - legislative purpose of embargo on enforcement of directors' guarantees during voluntary administration considered - need for administrator to have opportunity to make submissions

LEGISLATION CITED: Corporations Act 2001 (Cth)

CASES CITED: BBC Hardware Ltd v GT Homes Pty Ltd [1997] 2 QdR 123
Re Behan; Ex parte Pioneer Concrete (Qld) Pty Ltd (1995) 17 ACSR 725
Mead Corporation v Carbonless Papers (Australia) Pty Ltd [2002] WASC 268
Stegbar Pty Ltd v Mayfield (1993) 13 ACSR 354
Thomas v Bradnam's Windows & Doors Pty Ltd [1999] QCA 487
Wallabah Pty Ltd v Navillo Pty Ltd (1997) 23 ACSR 444

PARTIES :
National Australia Bank Limited - Plaintiff
Anthony Patrick King - First Defendant
Peter James King - Second Defendant

FILE NUMBER(S): SC 2341/03

COUNSEL: Mr J Stoljar - Plaintiff
Mr I Prider, Solicitor - Defendants

SOLICITORS: Mallesons Stephen Jaques - Plaintiff
Mr I Prider - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 18 JUNE 2003

2341/03 – NATIONAL AUSTRALIA BANK LIMITED v ANTHONY PATRICK KING & ANOR

JUDGMENT

1 The plaintiff, National Australia Bank Limited, is a creditor of each of seventeen companies known collectively as “the King bus companies” which conduct passenger transportation businesses in various parts of northern New South Wales. The directors of those companies are the present defendants, Anthony Patrick King and Peter James King.

2 The plaintiff says that the defendants are guarantors of financial obligations owed by the King bus companies to the plaintiff. The guarantees are said to have been created by a deed dated 3 October 2001. On 3 April 2003, the plaintiff demanded payment by the defendants of $146,999,741.96 under those guarantees, that being the total of the moneys said by the plaintiff to be then due by the King bus companies under the obligations claimed by it to be the subject of the guarantees.

3 On 8 April 2003 (that is, five days after demand was made upon the defendants under the guarantees), the King bus companies became subject to administration under Part 5.3A of the Corporations Act 2001 (Cth). This resulted, of course, from actions taken by the directors, being the present defendants. On the same day, the plaintiff appointed receivers and managers of the assets and undertaking of each of two of the King bus companies. On the following day, 9 April 2003, corresponding appointments were made by the plaintiff in relation to the remaining King bus companies.

4 The application with which I am currently dealing is an application by the plaintiff for leave to enforce against the defendants the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] NSWSC 525
Decision Date: 18 June 2003

CaseChat Overview and Summary

The case of National Australia Bank v King involved the National Australia Bank as the plaintiff and King, a director of a company, as the defendant. The dispute centred on the bank's application for leave to enforce certain guarantees made by the directors of a company that was undergoing voluntary administration. The High Court of Australia was tasked with determining the legal issues arising from this application.

The primary legal issues before the Court were whether the statutory embargo on enforcing directors' guarantees during a company's voluntary administration was absolute and whether the court had the discretion to permit enforcement despite the statutory provisions. The Court was also required to consider the legislative purpose behind the embargo and how it should be balanced with the rights of creditors.

The Court found that the statutory embargo on enforcing directors' guarantees during a voluntary administration was not absolute but rather provided the court with a discretion to allow enforcement in certain circumstances. The Court reasoned that the legislative purpose behind the embargo was to provide the administrator with an opportunity to make submissions and to facilitate the potential rehabilitation of the company without undue pressure from creditors. However, the Court held that if the administrator had already been given a reasonable opportunity to make submissions and there was no likelihood of the company being rehabilitated, the court could exercise its discretion to permit enforcement. The Court also emphasised the importance of balancing the interests of all stakeholders, including the creditors, in the context of voluntary administration.

The final orders of the Court allowed the National Australia Bank to enforce the guarantees made by the directors of the company, provided that the administrator had already been given a reasonable opportunity to make submissions and that there was no realistic prospect of the company being rehabilitated. This decision balanced the legislative intent behind the embargo with the need to protect the rights of creditors and provide a fair outcome in the context of a company's voluntary administration.

Orders