Playcorp Pty Ltd v Lineville Pty Ltd, in the matter of Lineville Pty Ltd (No 2)
[2014] FCA 316
•7 March 2014
FEDERAL COURT OF AUSTRALIA
Playcorp Pty Ltd v Lineville Pty Ltd, in the matter of Lineville Pty Ltd (No 2) [2014] FCA 316
Citation: Playcorp Pty Ltd v Lineville Pty Ltd, in the matter of Lineville Pty Ltd (No 2) [2014] FCA 316 Parties: PLAYCORP PTY LTD (ACN 002 277 363) and HOUSE CORPORATE PTY LTD (ACN 006 348 205) v LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) TRADING AS ROBINS KITCHENS
JOHN RICHARD PARK, KELLY-ANNE LAVINA TRENFIELD AND QUENTIN JAMES OLDE IN THEIR CAPACITIES AS JOINT AND SEVERAL DEED ADMINISTRATORS OF LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) AND LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
File number: QUD 56 of 2014 Judge: LOGAN J Date of judgment: 7 March 2014 Catchwords: CORPORATIONS – interlocutory application – appointment of provisional liquidators to company subject to a deed of company arrangement – application of s 532 Corporations Act 2001 (Cth) – ex parte application warranted in the circumstances – undertaking as to damages may not be appropriate where a company had ceased trading – application of s 472(2) Corporations Act 2001 (Cth) Legislation: Corporations Act 2001 (Cth) s 472 Date of hearing: 7 March 2014 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 17 Counsel for the Interlocutory Applicants: Mr J Peden Solicitor for the Interlocutory Applicants: King & Wood Mallesons
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 56 of 2014
IN THE MATTER OF LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 107 493 738 BETWEEN: PLAYCORP PTY LTD (ACN 002 277 363)
First PlaintiffHOUSE CORPORATE PTY LTD (ACN 006 348 205)
Second PlaintiffAND: LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) TRADING AS ROBINS KITCHENS
Defendant
BETWEEN: JOHN RICHARD PARK, KELLY-ANNE LAVINA TRENFIELD AND QUENTIN JAMES OLDE IN THEIR CAPACITIES AS JOINT AND SEVERAL DEED ADMINISTRATORS OF LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) AND LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Interlocutory Applicants
JUDGE:
LOGAN J
DATE OF ORDER:
7 MARCH 2014
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Pursuant to section 467(3) of the Corporations Act 2001 (Cth) (the Act), the requirements of service of this application are dispensed with.
2.Pursuant to section 472(2) of the Act, John Richard Park, Kelly-Anne Lavina Trenfield and Quentin James Olde (the Official Liquidators) are appointed jointly and severally provision liquidators of Lineville Pty Ltd (Subject to Deed of Company Arrangement) ACN 107 493 738 (Company). Insofar as the same may be required by section 532 of the Act, leave is granted to the Official Liquidators to consent to their appointment as provisions liquidators.
3.The Official Liquidators may forthwith take into their custody all property of the Company.
4.Service of this Order, together with the Application filed 7 March 2014 and affidavit of Ms Trenfield filed 7 March 2014, may be effected:
(a) by email to:
(i)as for Playcorp Pty ltd and House Corporate Pty Ltd, to the email address of Mr Sam Bond of SBA Law, being [email protected];
(ii)as for Klearin Pty Ltd and Mr Bart, to the email address of Mr Stephen Russell, being [email protected] and to Mr Bart at [email protected];
(iii)as for Warwick Parer, to the email address of [email protected] and to Mr Litster at [email protected];
(b)as for creditors and employees, by posting the abovementioned documents on the FTI Consulting website and sending to such addresses which the deed administrators have for such creditors and employees an email informing them of the appointment of provision liquidators and providing a reference to the FTI Consulting website.
5.The provision liquidators effect service of the documents referred to in paragraph 4 by 7.00pm Sunday 9 March 2014.
6.There be liberty to apply.
7.Costs of and incidental to this interlocutory application be reserved.
8.The application otherwise be adjourned to 12 March 2014. The provisional liquidators have leave to apply on 12 March 2014 for the winding up of the Company.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 56 of 2014
IN THE MATTER OF LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 107 493 738 BETWEEN: PLAYCORP PTY LTD (ACN 002 277 363)
First PlaintiffHOUSE CORPORATE PTY LTD (ACN 006 348 205)
Second PlaintiffAND: LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) TRADING AS ROBINS KITCHENS
Defendant
BETWEEN: JOHN RICHARD PARK, KELLY-ANNE LAVINA TRENFIELD AND QUENTIN JAMES OLDE IN THEIR CAPACITIES AS JOINT AND SEVERAL DEED ADMINISTRATORS OF LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) AND LINEVILLE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Interlocutory Applicants
JUDGE:
LOGAN J
DATE:
7 MARCH 2014
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This application which is made ex parte and urgently after hours touches upon a company which operates a very well known retail business, Robins Kitchen. As its name suggests, that business concerns the supply of a diverse range of culinary products. The business is operated by Lineville Pty Ltd (Subject to a Deed of Company Arrangement) (Lineville). The joint and several administrators of Lineville are Ms Kelly-Anne Trenfield, Mr John Park and Mr Quinton Olde. They have been appointed, pursuant to the deed of company arrangement.
The terms of the deed of company arrangement are set out in a deed of 10 February 2014, which is exhibited to an affidavit of Mr Stephen Lew, filed in Court. Of particular interest in relation to the present application is clause 4. That provides, amongst other things, for the director, a Mr Parer, “to remain in office throughout the Arrangement Period unless he resigns or is removed”. Also to be found in clause 4 is clause 4(j)(iii) which provides that:
(j) During the Arrangement Period, the Director and the Company must:
(i) …
(iii)conduct all of their operations in the ordinary course and in a proper and business-like manner;
…
Clause 4(i) of that deed provides that:
During the Arrangement Period the company must retain, on their current terms, the employees of the Company who are employed as at the Commencement Date.
Amongst other things, clause 4(h) also contains provision for the honouring of gift cards:
…only if holders spend $2 for each $1 value of a gift card, and then only to the extent of the sums so spent by such holders.
[sic]
There is no provision in clause 4(h) for any end date arbitrarily to be appointed in respect of gift cards.
The application this evening is for the appointment of the persons who are presently the joint and several administrators under the deed of company arrangement, each of whom is an official liquidator, as provisional liquidators of Lineville pursuant to s 472(2) of the Corporations Act 2001 (Cth) (Corporations Act). There is already pending in this Court an application by Playcorp Pty Ltd (Playcorp) and a related company, House Corporate Pty Ltd (House Corporate), for the setting aside of the deed of company arrangement. In essence, that application is founded upon an allegation that the report of the deed administrator to the second meeting of creditors, at which the deed came to be approved, contained material nondisclosures. What one might term the “Playcorp and House Corporation interests” are associated with a Mr Lew. The first directions hearing in respect of that particular application is to occur on 12 March 2014. I shall grant the provisional liquidators leave to apply on that date for the winding up of the company.
A number of events have occurred today which have given rise to a concern on the part of the administrators appointed under the deed of company arrangement that the deed is not being adhered to and that there is a need, as a consequence, for urgent action including, in particular, the appointment of a provisional liquidator. At 2.30 pm today Mr Parer, the director to whom I have referred, sent an email to an address group comprised of all Robins Kitchen stores and all Robins’ office users in these terms:
Good Afternoon Wonderful Robins Team
Due to the ongoing uncertainty of the legal position of the business, Mr Bart has regrettably come to a difficult decision and instructed that all store stock be secured and packed up to be shipped back to a central point.
Accordingly could all stores please close their doors and cease trading immediately until further notice and start preparing the stock for collection.
Could you please ensure all banking is done this afternoon.
The closure is temporary at this stage and no staff are being terminated. Please continue to come to work to pack up stock for transport.
What ever happens next I am super proud of the way you have all conducted yourselves. You are an incredible team and you have shown endurance and strength in the face of extreme uncertainty but it appears the forces against us are just too strong.
At the time of this communication the Deed of Company Arrangement is still in place.
Best Regards always
Warwick Parer
Robins KitchenLater this afternoon at 4.28 pm Mr Parer sent a further email, on this occasion to Lineville’s bankers, the National Australia Bank, and, in particular, a Mr Steve Lloyd of that bank on the subject of, “request to stop transfers.” That email was in these terms:
Steven
Three transactions were undertaken today in good faith based on instructions and advice from Mr Bart. The value of these transactions are $70,000; $120,000 and $130,000.
The administrator has now contacted me and advised there are reasons these transactions could be questioned and not in the interests of the administration.
Accordingly I am writing to request that if possible these transactions are stopped until we receive further advice.
Regards
Warwick Parer
When one examines the instructions apparently given by the director and marries them up as against the terms of the deed of company arrangement to which I have referred, there is established, in my view, a basis upon which one can conclude, prima facie, that the company is in the throes of ceasing business.
Mr Peden, who has appeared on behalf of the applicant deed of company administration administrators has, with the candour one is entitled to expect, highlighted that the property which is the subject of the order for packing referred to in the earlier of Mr Parer’s instructions to company staff may or may not be the subject of a Romalpa clause such that title to the goods concerned or, at least, some of those goods may not vest in the company. Obviously enough, it is not possible at the moment to determine that. It is enough, on the face of things, that there is an instruction to close doors and pack up the goods. Further, the evidence establishes that, in respect of some eight stores, the landlords concerned have terminated the leases. The company’s manner of operation is to operate from leasehold premises. There are in excess of 50 retail outlets, some eight of which, therefore, are the subject of these terminations of tenancy.
There is also, on the evidence, something of an interrogative note as to what may be the fate of other retail tenancies. Once again, that situation is not possible to determine at the present. It is enough that, in conjunction with the closure instruction, that some of the company’s retail outlets are now the subject of termination by landlords.
Taken in conjunction, the facts that I have related persuade me that the case is one, firstly, in which it is apt for the appointment of provisional liquidators and secondly, in which it is apt for the application to have been made urgently and ex parte. Thirdly, it is apt, that, insofar as leave is necessary at all under the Corporations Act for the deed of company administrators to be provisional liquidators, such leave be given to them. They are, in my view, the persons presently best placed to act as provisional liquidators.
There is a question, as always there is, as to whether there ought to be a requirement for the provision of a usual undertaking as to damages before a provisional liquidator is appointed. The authorities concerned are helpfully summarised by the authors of Australian Corporation Law Principles of Practice, in other words, paragraph 5.4.0413. Suffice it to say, where a company had ceased trading, there is authority that it may not be appropriate to require the provision of an undertaking as to damages.
As originally cast, there was propounded on behalf of the administrators under the deed of company arrangement that, if appointed as provisional liquidators, there be an interlocutory injunction against Mr Parer in respect of dealing with any assets of the company, including any bank accounts of the company. That particular aspect of this evening’s application is no longer pressed. I should record that, again, the factual situation in respect of the bank account is “evolving.” It may be, and it cannot be put any higher than this, because the information comes only on Mr Peden’s instructions, that the funds concerned, referred to in the email above, are to come back to the company.
Obviously enough, there is a concern in relation to the payment of staff, which has quite properly been highlighted by the administrators under the deed of company arrangement. If need be, the application can be brought back under liberty to apply, insofar as any need for particular orders in relation to staff or payment is concerned.
For the present, it seems to me that it will be sufficient if the administrators under the deed of company arrangement are appointed as provisional liquidators, with all of the powers conferred upon them by the Corporations Act. I propose to set out expressly one such power namely, that they may forthwith take into their custody all property of the company, because it may be useful to have that expressly stated in the court order, even though that would be an incident of the powers which the provisional liquidators enjoyed in any event. Further, expressing it in those terms makes it apparent that it is the property of the company which they must take into their custody. That will enliven on the part of the provisional liquidators the making of inquiries to give greater precision to the application, if any, of the Romalpa clause issue.
It is also necessary to make provision in the order for particular modes of service, given the proximity of the return date in Court on 12 March 2014 and the desirability of drawing attention as soon as possible to interested persons of the making of the orders this evening. I am quite satisfied that the particular means of service that are specified in the draft order are the most efficient and effective means of effecting service in the particular circumstances of this case. For these reasons there will be orders in terms of an annotated draft which I have signed and placed with the court papers.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 1 April 2014
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