O D Transport Pty Ltd v Mansell
[2000] VSC 99
•20 March 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL AND EQUITY DIVISION | Not Restricted |
CORPORATIONS LIST
No. 6547 of 1999
| O.D. TRANSPORT PTY LTD (ACN 004 620 544) & ORS | Appellants |
| v | |
| RICHARD GELL MANSELL and SIMON ALEXANDER WALLACE-SMITH (as liquidators in the winding up of OD TRANSPORT (AUSTRALIA) PTY LTD) | Respondents |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 March 2000 | |
DATE OF JUDGMENT: | 20 March 2000 | |
CASE MAY BE CITED AS: | O.D. Transport Pty Ltd v Mansell & Anor | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 99 | |
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Corporations – appeal against act or decision of liquidators – s. 1321 Corporations Law – whether liquidators should be required to further investigate dispute concerning admitted proof of debt – whether terms of settlement in an earlier proceeding limited the liquidators' right to fees and costs otherwise payable.
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APPEARANCES: | Counsel | Solicitors |
For the Appellants | P.D. Crutchfield | Irlicht & Broberg |
| For the Respondents | S. Glacken | Middletons Moore & Bevins |
HIS HONOUR:
This is an appeal pursuant to s.1321 of the Corporations Law which provides that a person aggrieved by any act, omission or decision of a liquidator may appeal to the court in respect of the act, omission or decision and the court may confirm, reverse or modify the act or decision or remedy the omission as the case may be and make such orders and give such directions as it thinks fit.
The respondents were appointed as liquidators in the winding up of OD Transport (Australia) Pty Ltd on 15 October 1992 by resolutions passed by the members and creditors of the company for the voluntary winding up of the company. On 21 May 1997 the respondents as liquidators commenced a proceeding in the Federal Court against the appellants, OD Transport Pty Ltd, Noel Robert May and Lynette Christine May, the latter two of the appellants being directors and shareholders of the company in liquidation.
Those Federal Court proceedings were the subject of terms of settlement which are in evidence before the court (exhibit "NRM1" to the affidavit of the secondnamed appellant). Among other things the terms of settlement provided for the appellants to pay to the liquidators the sum of $257,862.95 in reduction of the total quantum of the liquidators' claims in the Federal Court proceeding and the terms of settlement went on to provide for creditors to lodge proofs of debt and upon acceptance of those proofs of debt by the liquidators for the appellants to either pay the full amount of the debt so admitted or alternatively to commence an application pursuant to s.1321 of the law seeking orders that the liquidators' decision be overruled.
Principally and partly as a result of those terms this appeal was brought and by an amended notice of appeal dated 19 August 1999, in fact filed in the court on 17 December 1999, the appellants' appeal from what was described as the decision of the respondents contained in a letter from Messrs Middletons Moore & Bevins, lawyers to the respondents to Messrs Irlicht & Broberg, lawyers for the appellants, dated 29 July 1999.
That letter advised the appellants' solicitors of various decisions concerning proofs of debt, one of which related to a creditor, Kevin Cahill Heavy Haulage Pty Ltd for $3,180 in respect of which the liquidator said, "You have paid the amount of $880 in respect of this claim and accordingly our client requires payment by your client of the balance, being the sum of $2,300 forthwith".
In the last two paragraphs of the same letter, the solicitor for the respondent liquidators said, "We also require your client to pay the additional sum of $10,000 for liquidators' fees and $5,000 for the liquidators' legal costs associated with dealing with these proof of debt issues. Accordingly we are instructed to demand that your client pay the sum of", [and then there is an amount relating to the total of outstanding proofs of debt] plus additional legal and accounting costs of $15,000 within the next 14 days".
The original notice of appeal referred to a considerable number of proofs of debt but by the time the amended notice of appeal had been filed there were only four amounts in dispute or partly in dispute and by the time the appeal came before the court today only one proof of debt remained in issue, that is the proof of debt by Kevin Cahill Heavy Haulage Pty Ltd and the dispute related only to part of the claim, namely the sum of $1200.
The other matter which was the subject of the amended notice of appeal was entitled, "Claim for additional $10,000 for liquidators' fees and $5,000 liquidators' legal costs". And the ground of the appeal in respect of that item was, "The liquidators ought to have held that they were bound by the agreement dated 22 February 1999 which specified the amount of liquidators' fees and costs to be charged".
I should say immediately that this ground is not made out: it is quite clear that the agreement dated 22 February 1999 does not specify the amount of liquidators' fees and costs to be charged, however the appellants have sought to raise other matters in relation to that item which are not strictly covered by the amended notice of appeal.
I will deal first with the question of the proof of debt. Mr Crutchfield, who appears as counsel for the appellants, concedes that the onus is on the appellants to make out a case for disturbing the liquidators' admission of the proof of debt and he concedes that on the material before the court the appellants cannot make out a case that the proof of debt was incorrectly admitted or in other words that the debt did not exist.
What he has submitted, however, in substance, is that the proof of debt should be set aside because it appears on the material that the liquidators have failed to properly investigate a dispute concerning the sum of $1200 and that the court should direct the liquidators to carry out that investigation and to reconsider the proof of debt to the extent that it claims that sum of $1,200.
Again, that is not a matter that readily appears from the amended notice of appeal but it may perhaps be covered by it; in any event it has been argued and the material is before the court. It appears that when the directors put in the statement of affairs in relation to the company the item relating to the unsecured creditor, Kevin Cahill Heavy Haulage Pty Ltd was noted as being, "Amount claimed by creditors $3,180" and "amount admitted as owing $1,980", so it was clear from the statement of affairs that there was a dispute between the company, so far as the directors were concerned, and this creditor as to the sum of $1,200.
Mr Mansell, one of the liquidators, in his affidavit of 9 December 1999 sets out what occurred in relation to this proof of debt. I should say that it appears from the evidence that a proper proof of debt was put in with an attached "invoice" and it was in the sum of $3,180. The solicitors for the appellants (received by the solicitors for the respondents on 5 October 1999) sent a photocopy of a barrister's backsheet in relation to a Magistrates' Court proceeding between OD Transport (Vic) Pty Ltd, a related company, and the creditor, Kevin Cahill Heavy Haulage Pty Ltd.
The backsheet related to a proceeding, as I say, between that creditor and another company and Mr Mansell says in his affidavit, that the covering letter from the solicitors for the appellant seems to suggest that there is something recorded in the backsheet which would necessitate a rejection of the proof of debt. It I think ended up being common ground that there was nothing at least which would be evidence before the court and it seems to me nothing really comprehensible which emerged from that backsheet which would have entitled the liquidators to reject the proof of debt.
The question whether the liquidators should have made further enquiries in relation to this dispute, having regard to the discrepancy between the statement of affairs and the claim in the proof of debt and the indication by the solicitors for the appellants that in some way a court proceeding between different parties, or at least in which a different party was plaintiff, gave some ground for questioning the proof of debt, is the question which is sought to be decided by the court.
I am not satisfied on the material that it can be said that the liquidators have failed to take proper steps in relation to investigating this disputed item. They have received what is in effect a communication or submission from the solicitors for the appellants, purporting to put relevant material before them to challenge the proof of debt which they had admitted or were proposing to admit but it seems to me that that material did not assist the liquidators in reaching any conclusions and it was not, I think, incumbent upon them to go to huge amounts of expenditure to ascertain what the true facts were when the appellants themselves do not seem to have put a comprehensible statement of the facts before the liquidators.
It is noteworthy that even now when the matter comes to court, the appellants have not, as I appreciate the submissions that have been made to me, put a comprehensible account of the true facts or what they say are the true facts before the court and in fact concede that on the material before the court it could not be determined whether the debt was properly in existence or not.
There is material which suggests that the costs of enquiries which the liquidators would be obliged to carry out to further investigate this matter are likely to completely outweigh the amount involved and I do not think that the court should take the view that the liquidators should be ordered to carry out those enquiries over what is a relatively trivial amount.
Clearly it cannot be said that the decision of the liquidators is incorrect and I do not think that the material would justify the court in setting aside that decision merely in order to direct them to make those further enquiries. I do not think that there is sufficient in the material before the court to suggest that that would be a justifiable exercise or an economic exercise. Accordingly the appeal as to that aspect is dismissed.
The other matter before the court is the challenge to the decision of the liquidators to claim an additional $10,000 for their remuneration and $5000 for their costs in relation to the investigation of and dealing with these proofs of debt.
Mr Glacken, who appears as counsel for the respondents, submitted that the demand contained in the letter referred to in the amended notice of appeal did not amount to a decision within the meaning of s.1321 of the Corporations Law. However, the language of that section is very wide. It applies to any act, omission or decision and it seems to me that the act of the liquidators in making this demand, if not a decision, is certainly an act which is capable of being the subject of an appeal and might be capable of being the subject of, within the discretion of the court, some order confirming, reversing or modifying the act or decision and making such orders and giving such directions as it thinks fit and I will assume, for the purposes of this appeal, that the letter is an act of the liquidators or contains a relevant decision of the liquidators and, if one makes that assumption, it seems to me to be very clear that the appellants are persons who are entitled to say that they are "persons aggrieved" thereby because it is being contended by the letter which is the subject of the appeal that the appellants are liable to pay these additional costs and expenses to the liquidators. However, it was made clear by the liquidators that they did not so contend and that happened in or about December last year. It was made clear that the liquidators were not contending that the appellants were personally liable to pay these alleged additional fees and costs of the liquidators.
The appeal does not appear to me to extend to anything further than a challenge by the appellants to the liquidators' claim that the appellants were liable to pay those fees and costs and that that appears from the ground which was relied on in the amended notice of appeal, that the liquidators ought to have held that they were bound by the agreement which specified the amount of liquidators' fees and costs to be charged and it is the decision of the respondents contained in that letter of 29 July 1999 which is the subject of the appeal.
It certainly does not squarely appear anywhere that the appellants were seeking to raise what they have now raised with the Court, namely a wider question, whether the terms of settlement on their proper interpretation prevent the liquidators from claiming any fees and costs in the liquidation of the company and from the assets of the company and instead are, as the appellants contend, bound by the terms of settlement to look only to the sum of 257,000 plus any further moneys which the appellants were bound to pay under the terms of settlement to recover those fees and costs.
What the appellants are now contending is that the liquidators are not entitled to recover any fees and costs other than those which they can extract after all the creditors have been paid in full from the moneys which they have in the available pool, that is the $257,000 plus any further moneys which they were bound to pay under the terms of settlement.
As the additional moneys would have to be in respect of creditors who had not been paid, it would seem that the essence of the appellants' contention is that the agreement provides that the liquidators could only look to the sum of $257,000 for their fees and costs and then only after all creditors had been paid in full.
In my opinion that issue is not before the court on the notice of appeal and the only issue before the court is the question of the appellants' liability to pay those fees and costs a demand which the liquidators last year disclaimed, in effect withdrawing their demand that the appellants pay those moneys.
However, if that is an unduly narrow construction to take of the amended notice of appeal, and perhaps a somewhat pedantic approach to the application which is before the court, I will look at the terms of settlement and determine the substance of the claim which has been put under those terms and sought to be made the subject of this appeal.
It was submitted that a reading of the terms as a whole should lead to the conclusion that the liquidators were bound to look to the sum of $257,000 in the way that I have already mentioned as the sole source of their fees and costs. However, there is nothing expressly in terms of the settlement which so provides.
Paragraph 1 of the terms provides for the appellants to pay to the liquidators the sum of $257,862.95 in reduction of the total quantum of the liquidators' claims in the Federal Court proceeding. And then in paragraph 2, requires the liquidators to determine the true quantum of debts owing to creditors.
Paragraph 3 requires them to call on creditors for proofs of debt and to accept or reject the proofs of debt. Paragraph 4, which I have already referred to, requires the respondents either to pay those debts or alternatively to appeal from the acceptance of such a proof of debt and to pay the liquidators' costs on an indemnity basis associated with making submissions and being represented at such an application under s.1321 of the Law.
And then paragraph 5 deals with another situation not presently relevant, that is where proofs of debt are rejected and a creditor appeals. Paragraph 6 provides that the appellants agree to pay any amount which arises from a court determination as to a proof of debt together with costs. And paragraph 7 entitles the liquidators if the appellants fail to pay any of the amounts that they are obliged to pay to continue the proceedings which were the subject of the settlement.
Paragraph 8 of the terms provides that if the respondents have paid all the amounts that they are required to pay, that is the appellants have paid all the amounts which they are required to pay under the terms of settlement, then the liquidators agree to seek orders from the court that the applicants' claims in the Federal Court proceeding be discontinued with no order as to costs and the first respondent's counterclaim be discontinued with no order as to costs, and additionally, the appellants shall seek an order that the winding up of the company be forever stayed and the liquidators shall not oppose any application for such an order. I think it was agreed by the parties that the court would ultimately have power to make such an order by virtue of a combination of the provisions of s.482 and 511(1)(b) of the Corporations Law.
Then paragraph 9 provides that on all amounts being paid which are required to be paid under the terms of settlement, the parties agree to release and for ever discharge each other from all claims etc. arising out of the Federal Court proceeding. And the final sentence of paragraph 9 provides: "The [liquidators] further agree to return to the [appellants] any surplus moneys remaining in the liquidation after payment of all creditors' claims and the liquidators' costs and expenses".
It would seem to be an inference from that last sentence in paragraph 9 of the terms of settlement that there would only be surplus monies in the liquidation after all creditors' claims had been paid and the liquidators' costs and expenses of the liquidation had been paid, and far from supporting the construction advanced by the appellants, it does, if anything, support the conclusion that there was no agreement made to restrict the costs and expenses which the liquidators would be entitled to claim (if properly justified) in the liquidation of the company. Certainly there is nothing expressly in the terms of settlement which would in my view support the appellants' construction. There is some material before the court which suggests that an estimate of the liquidators' future fees and costs was taken into account in calculating the $257,000 and that appears from a letter written on behalf of the liquidators dated 18 March 1999 to the solicitors for the now appellants which refers to an earlier facsimile of 7 October 1998 in which the liquidators estimated that they would need the sum of $10,000 to pay their fees associated with completing the liquidation and that legal fees of $5,000 would also be incurred, and "this additional sum of $15,000 was included in the settlement quantum".
Of course the court cannot take that into account when interpreting the terms of settlement and it would seem that the parties at the time that they negotiated the terms of settlement failed to make provision for what might occur if the liquidators' fees and costs should exceed that estimate.
Had it been intended by the parties to restrict the liquidators' fees and costs to the estimated sum, one would have expected the terms of settlement to have contained such a provision, but they do not. In my opinion there is no basis on a proper construction of the terms of settlement to reach the construction urged by the appellants. It was submitted that an appropriate term could be implied but I do not think that it is in any way an obvious or a necessary implication that the liquidators' fees and costs should be so limited. It may be arguable if one takes account of the negotiations that that was perhaps had in mind but it may only have been had in mind by the appellants and not by the liquidators. In any event that is mere speculation and I do not think that the accepted tests for implied terms are such that the construction urged by the appellants could be justified. So my conclusion is that if this issue does properly arise under the amended notice of appeal then it should be resolved adversely to the appellants. For those reasons the appeal should be dismissed as to both aspects.
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