Pleash v Butler; In the Matter of Razzmatazz Pty Limited (No 2)
[2010] FCA 464
FEDERAL COURT OF AUSTRALIA
Pleash v Butler; In the Matter of Razzmatazz Pty Limited (No 2) [2010] FCA 464
Citation: Pleash v Butler; In the Matter of Razzmatazz Pty Limited (No 2) [2010] FCA 464 Parties: BLAIR PLEASH v MELVIN THOMAS BUTLER; IN THE MATTER OF RAZZMATAZZ PTY LIMITED ACN 113 244 554 AND THE CORPORATIONS ACT 2001 (CTH) File number: NSD 639 of 2009 Judge: FOSTER J Date of judgment: 11 May 2010 Legislation: Corporations Act 2001 (Cth), s 444B Cases cited: Pleash v Butler; In the Matter of Razzmatazz Pty Limited (No 1) [2010] FCA 463 related Date of hearing: 11 May 2010 Place: Sydney Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 18 Solicitor for the Plaintiff: Mr J Lucas of Etienne Lawyers Solicitor for the Defendant: There was no appearance either by or on behalf of the defendant
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 639 of 2009
IN THE MATTER OF RAZZMATAZZ PTY LIMITED ACN 113 244 554 AND THE CORPORATIONS ACT 2001 (CTH)
BETWEEN: BLAIR PLEASH
PlaintiffAND: MELVIN THOMAS BUTLER
Defendant
JUDGE:
FOSTER J
DATE OF ORDER:
11 MAY 2010
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.There be judgment for the plaintiff against the defendant in the amount of $61,445.21.
2.The defendant pay the plaintiff’s costs of the proceeding including any reserved costs.
3.The exhibits be returned at the expiration of 21 days from the date hereof.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 639 of 2009
IN THE MATTER OF RAZZMATAZZ PTY LIMITED ACN 113 244 554 AND THE CORPORATIONS ACT 2001 (CTH)
BETWEEN: BLAIR PLEASH
PlaintiffAND: MELVIN THOMAS BUTLER
Defendant
JUDGE:
FOSTER J
DATE:
11 MAY 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Blair Pleash (the plaintiff) is now the sole administrator appointed under a Deed of Company Arrangement dated 22 May 2008 entered into between Mr Pleash and Geoffrey McDonald as Deed Administrators, Razzmatazz Pty Limited as the company in respect of which the arrangement was made and Melvin Thomas Butler (the defendant) who was, at the time the Deed was entered into, the sole director of Razzmatazz Pty Limited. The Deed of Company Arrangement (the Deed) was entered into after the creditors of Razzmatazz Pty Limited resolved on 1 May 2008 that the company should enter into that Deed upon the terms outlined in the relevant resolution.
Recital D in the Deed is in the following terms:
The sole Director of the Company has resolved that this instrument be executed by or on behalf of the Company as its Deed of Company Arrangement and the Administrator has consented to the Director of the Company executing this Deed on behalf of the Company.
The Director referred to in Recital D and throughout the Deed is the defendant. The Company referred to in Recital D and throughout the Deed is Razzmatazz Pty Limited.
Clause 4 of the Deed is in the following terms:
Provision of Funds
The Company and the Director, both of them jointly and each of them severally, AGREE TO PAY the amount referred to in Item 8 of the Schedule hereto to the Deed Administrator in clear funds over the period referred to in Item 9 of the Schedule hereto, provided always that the amount referred to in Item 8 of the Schedule hereto may be paid at any time earlier than specified in Item 9 of the Schedule hereto and the Company and the Director, both of them jointly and each of them severally, agree to pay such additional amounts that may arise by virtue of clause 9 hereof (“Default in payment under Clause 4”).
Item 8 of the Schedule specifies that the amount to be paid by Razzmatazz Pty Limited and the defendant pursuant to cl 4 of the Deed is $55,000. In Item 8, the fact that $10,000 of the requisite $55,000.00 is recorded as having been paid into the administrator’s trust account prior to 22 May 2008. The evidence before me was that, notwithstanding the terms of Item 8 of the Schedule to the Deed, prior to the execution of the Deed, only $5,000 had been paid of the $10,000 referred to at Item 8 of that Schedule. The balance of the amount required to be paid under the Deed (namely, $45,000) was to be paid in five equal monthly instalments of $9,000 each with the first payment to be made on 15 June 2008. The evidence established that none of the five payments of $9,000 each has been made.
Clause 9 of the Deed provides that, should there be default on the part of Razzmatazz Pty Limited and the defendant in making any of the payments required to be made by them under the Deed, the administrators would be entitled to demand the payment of the whole of the balance then owing with interest at the rate of 15% per annum, such interest to commence to run 14 days after demand is made.
Clause 25.1 of the Deed is in the following terms:
Obligation to pay and guarantee
25.1The Director will provide a personal guarantee as required in item 6 of the schedule hereto to guarantee the payment under clause 4 and 5 hereof, and the due and faithful performance by the company of all obligations under this Deed. The Director indemnify’s [sic] and agrees to keep the Administrators indemnified against an [sic] loss or expenses whatsoever and howsoever arising in connection with an [sic] default by the Director of [sic] the Company in so performing any of the obligations contained in this Deed. For the avoidance of doubt, the guarantee provided herein shall be enforceable against the Director in the event that this Deed is terminated, for whatever reason.
Item 6 of the Schedule specifies that there are no further documents required to be executed by the defendant pursuant to cl 25 of the Deed.
When the proceeding was called on for hearing this morning, a solicitor sought leave to appear on behalf of the defendant and applied for an adjournment of the hearing. I refused that adjournment (see Pleash v Butler; In the Matter of Razzmatazz Pty Limited (No 1) [2010] FCA 463). That solicitor then withdrew and the matter proceeded in the absence of the defendant.
The defendant filed a Defence at a time when he was represented by his former solicitors, who acted for him throughout the period from July 2009 until very recently. That Defence is in the following terms:
1.The Respondent denies he is indebted to the Applicant in the sum of $55,636.55 or at all.
2.The Respondent admits there was a meeting of the Creditors of the company on 1 May 2009 under s439A of the Corporations Act (“the Act”) where the Company’s Creditors resolved to execute a Deed of Arrangement (“the said meeting”).
3.The Respondent denies an instrument setting out the terms of the said deed was executed within 21 days of the said meeting as required by s444B(2) of the Act.
4.The Respondent denies he is bound under s444G of the Act to pay any moneys to the Applicant.
It is difficult to discern the precise contention which is sought to be raised by par 3 of the Defence. The pleader seems to assume that the Deed was required to be executed within 21 days of 1 May 2009 and seems to go on to assert that it was not executed within that timeframe.
The evidence tendered before me demonstrates that the Deed was executed by no later than 22 May 2008, at least by the defendant both on behalf of himself and on behalf of Razzmatazz Pty Limited. It was forwarded to the administrators on 22 May 2008. The Deed has also been executed by Mr Pleash and Mr McDonald. There is no evidence to suggest that they did not sign the document as soon as practicable after it was executed by Razzmatazz Pty Limited.
In May 2008, s 444B of the Corporations Act 2001 (Cth) (the Act) was in the same terms as it is in today. The section provides as follows:
444B Execution of deed
(1)This section applies where an instrument is prepared under section 444A.
(2)The company must execute the instrument within:
(a)15 business days after the end of the meeting of creditors; or
(b)such further period as the Court allows on an application made within those 15 business days.
(3)The board of the company may, by resolution, authorise the instrument to be executed by or on behalf of the company.
(4)Subsection (3) has effect despite section 437C, but does not limit the functions and powers of the administrator of the company.
(5)The proposed administrator of the deed must execute the instrument before, or as soon as practicable after, the company executes it.
(6)When executed by both the company and the deed’s proposed administrator, the instrument becomes a deed of company arrangement.
(7)Division 12 provides for consequences of the company contravening subsection (2).
It is clear that Razzmatazz Pty Limited was required to execute the Deed within 15 business days of 1 May 2008, not within 21 days of that date as the parties seem to have thought. It just so happens that, in the circumstances of this case, the timeframe specified in s 444B(2)(a) expired at midnight on 22 May 2008. This is 21 days after 1 May 2008. I have arrived at the conclusion that the Deed was executed within 15 business days of 1 May 2008 on the basis that the period of time laid down by the relevant statutory provision should be interpreted as not including the day upon which the creditors resolved that Razzmatazz Pty Limited should execute the Deed (viz 1 May 2008). I have come to this view by construing the word “within” in s 444B(2) of the Act as requiring that the day when the resolution was passed not be counted as part of the 15 business day period specified in s 444B(2)(a) of the Act.
I therefore find that the Deed was executed by Razzmatazz Pty Limited within the timeframe required by s 444B(2)(a) of the Act and thus became effective as a Deed of Company Arrangement. I also find that the defendant also executed the Deed by no later than 22 May 2008. That being so, the defendant became liable under the Deed to pay the amounts required to be paid by cl 4 read with Item 8 of the Schedule to the document. Razzmatazz Pty Limited became bound by the Deed and so did the defendant. I do not think that cl 25 adds anything to the plaintiff’s claim. In any event, there is a real question as to whether, given the way the Deed was otherwise drafted, cl 25 has any work to do.
The plaintiff has proven that none of the payments required to be made by Razzmatazz Pty Limited and the defendant under cl 4 of the Deed was made with the exception of a payment of $5,000.00 made prior to the Deed being executed by Razzmatazz Pty Limited and the defendant and being delivered to the administrators. Indeed, the defendant did not assert that either he or Razzmatazz Pty Limited had made any of those payments. His pleaded defence was that he was not obliged to make any of those payments because he was not bound by the Deed.
For these reasons, I am satisfied that the plaintiff is entitled to judgment against the defendant in the amount of $50,000.00 plus interest at the contractual rate of 15% per cent (as to which see cl 9 and Item 12 of the Schedule to the Deed). I think that interest should commence to run from 31 October 2008. This is because the date upon which the final payment under cl 4 of the Deed was to be made was 15 October 2008. By that date, demands had been made for the payment of the first three instalments due. By then, the defendant must have appreciated that the administrator was seeking payment of the whole amount then due with interest. 1 November 2008 is more than 14 days after the due date for the last instalment.
There will be judgment for the plaintiff against the defendant in the amount of $61,445.21, being $50,000.00 debt plus $11,445.21 interest. I order that the defendant pay the plaintiff’s costs of the proceeding, including any reserved costs.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate:
Dated: 12 May 2010
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