Neobev Pty Ltd v Bacchus Distillery Pty Ltd (Administrators Appointed)
[2013] FCA 1188
•12 November 2013
FEDERAL COURT OF AUSTRALIA
Neobev Pty Ltd v Bacchus Distillery Pty Ltd (Administrators Appointed)
[2013] FCA 1188
Citation: Neobev Pty Ltd v Bacchus Distillery Pty Ltd (Administrators Appointed) [2013] FCA 1188 Parties: NEOBEV PTY LTD (ACN 165 795 746) v BACCHUS DISTILLERY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 065 961 711); MAX SCOTT CONSULTING PTY LTD and MAX SCOTT File number: SAD 291 of 2013 Judge: BESANKO J Date of judgment: 12 November 2013 Catchwords: PRACTICE AND PROCEDURE – Application by respondent for the hearing of a separate question pursuant to Rule 30.01 of the Federal Court Rules 2011 (Cth) – where respondent is in administration – where administrators raise commercial considerations – where the trial should be heard expeditiously. Legislation: Corporations Act 2001 (Cth) ss 439B(2), 556(1), Part 5.3A Date of hearing: 11 November 2013 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 15 Counsel for the Applicant/Cross Respondents: Mr P Crutchfield SC with Mr L Merrick Solicitor for the Applicant/Cross Respondents: Piper Alderman Counsel for the Respondent/Cross Claimant: Mr M Livesey QC Solicitor for the Respondent/Cross Claimant: DMAW Lawyers as agent for Mills Oakley Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 291 of 2013
BETWEEN: NEOBEV PTY LTD (ACN 165 795 746)
Applicant/First Cross RespondentMAX SCOTT CONSULTING PTY LTD
Second Cross RespondentMAX SCOTT
Third Cross RespondentAND: BACCHUS DISTILLERY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 065 961 711)
Respondent/Cross Claimant
JUDGE:
BESANKO J
DATE OF ORDER:
12 NOVEMBER 2013
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.Further consideration of the respondent’s interlocutory application dated 7 November 2013 be adjourned to Thursday 14 November 2013 at 2.15pm (Adelaide time).
2.Costs reserved.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 291 of 2013
BETWEEN: NEOBEV PTY LTD (ACN 165 795 746)
Applicant/First Cross RespondentMAX SCOTT CONSULTING PTY LTD
Second Cross RespondentMAX SCOTT
Third Cross RespondentAND: BACCHUS DISTILLERY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 065 961 711)
Respondent/Cross Claimant
JUDGE:
BESANKO J
DATE:
12 NOVEMBER 2013
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
Bacchus Distillery Pty Ltd (Administrators Appointed) (ACN 065 961 711) (“Bacchus Distillery”) was placed in administration under Part 5.3A of the Corporations Act 2001 (Cth) (“the Act”) on 9 September 2013. Mr Bruno Secatore and Mr Daniel Juratowitch were appointed joint and several administrators of the company.
On 4 October 2013 Neobev Pty Ltd (ACN 165 795 746) (“Neobev”) commenced a proceeding in this Court against Bacchus Distillery.
On 7 November 2013 Bacchus Distillery issued an interlocutory application seeking, among other orders, the following order:
1.Pursuant to rule 30.01 of the Federal Court Rules 2011 (Rules), the following questions (the Separate Questions) be determined separately from and prior to all other questions in the proceeding:
(a)Was it a term of the agreement between the Respondent/Cross-Claimant (Bacchus) and Max Scott (Scott) of Max Scott Consulting Pty Ltd (MSC) that:
(i)Scott and MSC would assign to Bacchus all rights they held in relation to the invention referred to in paragraph 5 of the Statement of the Claim (the Invention) and permit Bacchus to register all relevant intellectual property rights in relation to the Invention; and
(ii)Bacchus would have an unconditional, irrevocable and transferrable licence to use all materials produced by Scott on behalf of Bacchus pursuant to the agreement.
(b)If the answer to any part of the first question is “no”:
(i)are Scott and MSC estopped from denying that Bacchus is the owner of all relevant intellectual property rights in relation to the Invention and holds an unconditional, irrevocable and transferrable licence to use all materials produced by Scott on behalf of Bacchus pursuant to the agreement; and
(ii)was the purported assignment from Scott and MSC to the Applicant/First Cross-Respondent (Neobev) referred to in paragraph 11 of the Statement of Claim subject to the rights of Bacchus in relation to the Invention and the materials produced by Scott on behalf of Bacchus pursuant to the agreement.
Bacchus Distillery also seeks an order that the separate question be set down for hearing on 4 December 2013, or such other date as fixed by the Court. They also seek a number of pre-trial orders designed to facilitate the hearing of the separate question on 4 December 2013. Bacchus Distillery’s application for the hearing of the separate question was supported by a number of affidavits. The principal affidavits were three affidavits of Mr Secatore dated 15 October 2013, 31 October 2013 and 6 November 2013 respectively. I heard argument on the application on 11 November 2013. I have decided that the application for the hearing of the separate question should be refused. However, I have decided that the proceeding is one appropriate for expedition and, subject to the availability of a judge and the parties being ready for a hearing, the trial should take place in December 2013, that is to say, next month.
The items of property which are in issue in this proceeding are an invention which is the subject of, and protected by, Australian Standard Patent 2006201593, and associated intellectual property. The associated intellectual property is divided into what is said to be copyright works and confidential information.
It is necessary to make a decision on this application promptly and in those circumstances, these reasons are to an extent abbreviated. I think there are five features of the proposed separate question which are important. First, the relevant period, so far as the invention is concerned, is a four year period between 2003 and 2007 and the relevant period, so far as the associated intellectual property is concerned, is a 10 year period between 2003 and 2013. The length of those periods may not be very relevant as far as question (a) is concerned, but it is relevant as far as question (b) is concerned. It means that there could be a fairly extensive factual inquiry. Secondly, and in a sense following from this, question (b) means there could be extensive cross-examination of the key witnesses who, I am told, are likely to be Mr Max Scott for Neobev and Mr Damien Hajdinjak for Bacchus Distillery. Thirdly, the separate question raises what seems to me to be the rump of the case. There are, as far as I can tell on the material before me, residual issues raised in the pleadings such as whether the register of patents should be rectified, whether certain information was confidential, whether there was copyright in certain material, and whether the respondent is liable to pay additional damages. Counsel for the applicant submitted that the insolvency termination clause issue (paragraph 28 of the Statement of Claim) was also a residual issue. I am disposed to think that that is covered by the separate question. Fourthly, it is said that the hearing of the separate question is likely to occupy two to three days in hearing time. It is difficult for the Court to make accurate predictions as to estimated hearing times, particularly when affidavits or statements of witnesses have not yet been filed. Nevertheless, I think an estimate of three days is not unrealistic. It is difficult to estimate what the residual issues will add to the hearing time, but I think it is to be unlikely to be more than two to three days. Finally, there is a distinct possibility that witnesses with respect to the separate question will have to give evidence again at the trial of the residual issues.
All of these matters suggest to me quite strongly that there should not be the hearing of a separate question.
The administrators of Bacchus Distillery advanced significant commercial considerations in favour of the hearing of a separate question.
The administration commenced on 9 September 2013. The first meeting of creditors of the company was held on 19 September 2013. The second meeting of creditors was held on 14 October 2013 and has adjourned (see s 439B(2) of the Act for the maximum period of such an adjournment).
The administrators are seeking to sell the company’s assets as a package by way of a competitive sale process. The company’s assets consist of the following classes of assets:
(1)plant and equipment;
(2)finished goods;
(3)leasehold interests in premises;
(4)raw materials and packaging;
(5)intellectual property including, but not limited to, the invention and associated intellectual property;
(6)registered business name, telephone numbers, websites and other miscellaneous assets.
The administrators believe that they will achieve a significantly better price for the assets if they sell them as a package by way of a competitive sale process rather than selling by auction, for example, the plant and equipment and the finished goods. They believe that a disposition by a competitive sale process will satisfy the liability to the company’s secured creditors, cover the administrators’ expenses properly incurred pursuant to s 556(1)(a) of the Act and provide a return to the company’s former employees pursuant to s 556(1)(e) of the Act.
The problem for the administrators is that they have limited funds at their disposal and they are incurring ongoing liabilities with respect to rent for the leasing of premises and the payment of utilities. Their key contention is summarised in the last four paragraphs of Mr Secatore’s affidavit sworn on 6 November 2013:
63.However, due to the costs of maintaining the Premises and this proceeding, the Administrators cannot justify maintaining the lease for Factories 1 and 3 beyond 24 December 2013. Should the Administrators be forced to vacate the Premises, the Administrators will be forced to auction the Bacchus’ plant and equipment and remaining finished goods quickly without the Invention or any of the Associated IP or the other assets listed in paragraph 14 above.
64.Before the Administrators run a competitive sales process they need certainty as to Bacchus’ ownership of the Invention and the Associated IP by at least 12 December 2013 to allow the Administrators sufficient time to sell Bacchus’ assets and vacate the Premises by 24 December 2013.
65.From the Administrators’ point of view, the Separate Questions would fully determine the Administrators’ rights to sell the Invention and Associated IP and dispose of the Proceeding.
66.If the Separate Questions could be heard and determined by 12 December 2013, this would allow the Administrators sufficient certainty to either:
(a)commence a formal and competitive sales process for Bacchus’ assets as a whole; or
(b)auction Bacchus’ assets and vacate the Premises.
It appears that none of the secured creditors whose debts total $2,256,724 are prepared, to this point, to cover ongoing expenses.
Leaving aside the commercial considerations identified by the administrators, I do not think that this is an appropriate case for the hearing of a separate question for the reasons I have given. The commercial considerations identified by the administrators are relevant but to my mind insufficient to justify a contrary conclusion. It seems to me neither realistic or efficient to think that a three day trial, which may potentially raise complex factual issues including issues of credit, should be heard and determined (including the preparation therefor) before 12 December 2013.
However, I am satisfied that this case is an appropriate case for expedition, and I did not understand the applicant to suggest otherwise. It seems to me that, with appropriate case management, both before and during the trial, there is a fair chance the trial will be concluded within five days. It should be possible for the proceeding to be prepared for a trial in the middle of December 2013. It is likely that it will be necessary to make inquiries about the availability of a judge to hear the trial.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate:
Dated: 12 November 2013
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