CORPORATIONS - Application by liquidator for directions under s 479(3) of the Law - circumstances in which direction should be given - liquidator seeking to protect himself from law suits threatened by a creditor - direction opposed by a creditor - whether directions should be given - liquidator as officer of court entitled to court’s assistance - direction given to liquidator.
CORPORATIONS - Application by liquidator for directions under s 479(3) of the Law - whether liquidator should discontinue action for damages with little chance of success - extent to which liquidator should incur additional expense by making further enquiries of creditors to provide funding - evidence as to prospects of success in action for damages - evidence as to costs of continuing to conduct proceedings - direction given that liquidator acting appropriately to discontinue proceedings.
Corporations Law, s 479(3)
Re G.B. Nathan & Co Pty Ltd (In Liquidation) (1991) 24 NSWLR 674 considered Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 considered and applied Re Lemon Tree Passage & Districts RSL and Citizens Club Co-Operative Ltd (1987) 11 ACLR 796 considered and applied Shiraz Nominees Pty Ltd (In Liquidation) v Collinson (1985) 3 ACLC 706 considered and applied
AND: ADDSTONE PTY LTD (ACN 010 764 977) (IN LIQUIDATION) and OTHERS
SG 3080 of 1995
MANSFIELD J ADELAIDE
3 SEPTEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DISTRIBUTION
SOUTH AUSTRALIA DISTRICT REGISTRY
SG 3080 of1995
RE:
CORPORATIONS LAW
AND:
ADDSTONE PTY LTD (ACN 010 764 977) (IN LIQUIDATION) AND OTHERS
JUDGE:
MANSFIELD J
DATE:
3 SEPTEMBER 1997
PLACE:
ADELAIDE
REASONS FOR DECISION
INTRODUCTION
Application for directions under s 479(3) of the Corporations Law (“the Law”) made by Peter Ivan Macks (“the liquidator”) as liquidator of Emanuel Management Pty Ltd (In Liquidation) (“Management”) and of Emanuel Holdings Pty Ltd (In Liquidation) (“Holdings”).
Between 9 January 1995 and 30 August 1995 the liquidator was appointed liquidator of sixty four companies known collectively as the Emanuel Group, including Management and Holdings to each of which he was appointed liquidator on 30 August 1995.
The directions sought relate to how the liquidator should continue to conduct two separate but related proceedings instituted in the Supreme Court of the Australian Capital Territory, in which Management and Holdings were each plaintiffs with Guiseppe Emanuele (“Mr Emanuele”). Those proceedings were commenced on 4 November 1991 and 16 October 1996 and are numbered Action Nos 796 of 1991 and 994 of 1996 respectively. I shall call them the first Compensation Claim and the second Compensation Claim and together the “Compensations Claims”. On 7 March 1997, Higgins J in that court in his discretion dismissed the three plaintiffs’ claims in the two actions on the ground that, as pleaded, they had no prospect of success.
An…
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.
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Details
AGLC
Re Addstone Pty Ltd (in liq) [1997] FCA 1043
Case
[1997] FCA 1043
Decision Date
CaseChat Overview and Summary
The Federal Court of Australia heard an application by Peter Ivan Macks, the liquidator of Emanuel Management Pty Ltd (Management) and Emanuel Holdings Pty Ltd (Holdings), both of which were in liquidation. The application sought directions under section 479(3) of the Corporations Law regarding the continuation of two compensation claims (the "Compensation Claims") instituted in the Supreme Court of the Australian Capital Territory. The liquidator faced pressure from Guiseppe Emanuele (Mr Emanuele) and his sons, Mr Linton Emanuele and Mr Rocco Emanuele (collectively, "the Emanueles"), to continue to prosecute the Compensation Claims on behalf of Holdings and Management. The Emanueles also threatened to sue the liquidator for breach of duty and negligence if he did not support their proposed Scheme of Company Arrangement, which included the continued prosecution of the Compensation Claims. The key legal issues were whether the Court should give directions to the liquidator on how to proceed with the Compensation Claims and, if so, what those directions should be. The Court considered the relevant principles governing directions under section 479(3), the liquidator's considerations and dealings with the Emanueles, and the liquidator's dealings with creditors. The Court concluded that it should give directions to the liquidator, as he was at a critical point in the conduct of the Compensation Claims and faced significant challenges in funding the appeals and the potential trial. The Court found that the Compensation Claims had little chance of success, and there were no meaningful proposals from creditors to fund the claims. Therefore, the Court directed the liquidator to act appropriately by discontinuing the Compensation Claims, given the circumstances and the lack of alternative resolutions.