Re 2 Nails Pty Ltd (in Liq) - [2018] VSC 745

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S CI 2018 01531

IN THE MATTER of 2 NAILS PTY LTD (ACN 155 339 978) (in liquidation)

BETWEEN:

EMPEROR HOMES PTY LTD (ACN 124 290 080)	Appellant
and
2 NAILS PTY LTD (ACN 155 339 978) (in liquidation)	First Respondent
and
MALCOLM KIMBAL HOWELL and GLENN ANTHONY CRISP (in their capacity as joint and several liquidators of 2 NAILS PTY LTD (ACN 155 339 978) (in liquidation)	Second Respondents

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JUDGE:	Sifris J
WHERE HELD:	Melbourne
DATE OF HEARING:	29 November 2018
DATE OF JUDGMENT:	6 December 2018
CASE MAY BE CITED AS:	Re 2 Nails Pty Ltd (in Liq)
MEDIUM NEUTRAL CITATION:	[2018] VSC 745
JUDGMENT APPEAL FROM:	Re 2 Nails Pty Ltd (in liq) (unreported, 22 August 2018)

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CORPORATIONS – Application under s 500(2) Corporations Act 2001 (Cth) for leave to proceed against company in liquidation – Associate Judge refused leave and adjourned the application – Appeal from Associate Judge – Proposed proceeding not inutile or unnecessary – Fresh evidence as to kerbside valuation not available to Associate Judge – Leave to proceed granted with conditions.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	J Foster	MNG Lawyers
For the Respondents	N Papaleo	Dorsia Legal

HIS HONOUR:

The Appellant appeals against the order of an Associate Judge of the Court dated 22 August 2018 adjourning the Appellant’s application for leave to proceed against 2 Nails Pty Ltd (in liquidation) (Company) pursuant to s 500(2) of the Corporations Act 2001 (Cth) (Act).

In essence, the Appellant submits that the discretion exercised by the Associate Judge under s 500(2) of the Act miscarried, as the Associate Judge erroneously determined that:

(a) Leave to proceed would serve no purpose and/or was unnecessary; and

(b) There were no funds available in the Company until such time as the development has concluded.

The Appellant seeks an order that leave to proceed against the Company be granted.

The Respondents submit that the Associate Judge was correct in his approach and that the appeal should be dismissed.

Background

On 7 June 2015 the Appellant and 2 Nails Pty Ltd (Company) entered into a contract for the construction of two triple storey town houses on the land situated at 130 The Boulevard, Aberfeldie (Property) (Building Contract).

On 3 March 2016 and before construction was completed, the Company was wound up voluntarily by its members. Malcolm Kimbal Howell and Glenn Anthony Crisp (the Liquidators) were appointed Liquidators of the Company.

Despite the liquidation, by a Management and Indemnity Deed (Deed) dated 8 March 2016 the Liquidators on behalf of the Company elected to affirm the Building Contract and Pure Development & Project Management Pty Ltd (Pure Development) was appointed as a progress manager.

On this basis, the Appellant continued construction and received numerous payments pursuant to the terms of the Deed.

In January 2017, the parties…

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.

Continue reading Re 2 Nails Pty Ltd (in Liq)

Details

AGLC: Re 2 Nails Pty Ltd (in Liq) [2018] VSC 745
Case: [2018] VSC 745
Decision Date: 6 December 2018

CaseChat Overview and Summary

Re 2 Nails Pty Ltd (in Liq) involved an application under section 500(2) of the Corporations Act 2001 (Cth) by the liquidators of 2 Nails Pty Ltd seeking leave to proceed with a proceeding against the company while it was in liquidation. The application was initially refused by an Associate Judge, who also adjourned the application pending the liquidators' leave to appeal. The liquidators subsequently appealed against the Associate Judge's decision to the Federal Circuit Court of Australia. The primary issue before the Court was whether the proposed proceeding against the company in liquidation was inutile or unnecessary, and if not, whether leave should be granted to proceed with the application.

The Court considered the principles governing applications for leave to proceed against a company in liquidation and examined the nature of the proposed proceeding. The Court determined that the proposed proceeding was not inutile or unnecessary as it related to matters that were not fully determined during the liquidation process. The Court also considered the availability of fresh evidence regarding a kerbside valuation, which was not before the Associate Judge but was available to the Court on appeal. The Court found that the liquidators had demonstrated a sufficient likelihood of success in the proposed proceeding and that there were no substantial reasons to deny leave. Consequently, the Court granted leave to proceed with the application, subject to certain conditions to protect the interests of creditors and the company.

The Court's decision was grounded in the statutory framework provided by the Corporations Act and the case law interpreting the provisions. The Court recognised the importance of allowing liquidators to pursue meritorious claims to recover assets for the benefit of creditors, while also balancing the need to avoid unnecessary litigation and protect the interests of creditors. The Court's order granted the liquidators leave to proceed with their application, subject to conditions that included providing security for costs and undertaking to notify relevant parties of the proceedings. The Court's decision underscored the importance of a careful and considered approach to applications for leave to proceed against a company in liquidation, taking into account the specific circumstances of each case and the interests of all stakeholders.

Orders