ASCOT VALE SELF STORAGE CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 092 643 939) AND ANOTHER	Plaintiffs
v
NOM DE PLUME NOMINEES PTY LTD (ACN 006 750 090) AND ANOTHER	Defendants

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JUDGE:	Judd J
WHERE HELD:	Melbourne
DATE OF HEARING:	29 October 2015
DATE OF JUDGMENT:	22 December 2015
CASE MAY BE CITED AS:	Re Ascot Vale Self Storage Centre Pty Ltd
MEDIUM NEUTRAL CITATION:	[2015] VSC 751

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CORPORATIONS – Liquidator’s application to approve litigation funding agreement – Standing of defendants to object – Secured creditor as litigation funder – Contest over validity of security – Benefit to unsecured creditors uncertain – Application refused – Corporations Act 2001 (Cth) s 477(2B).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Harvey	Piper Alderman
For the Defendants	Mr P Bick, one of Her Majesty’s Counsel with Mr B Gibson	S B A Law

HIS HONOUR:

On 1 August 2013 Ascot Vale Self Storage Centre Pty Ltd (the company) and its liquidator, Simon Wallace-Smith, applied to the court by Originating Process for an order that the defendants, Nom De Plume Nominees Pty Ltd and Richard John Leggo, pay a sum not exceeding $6,246,821, or damages in the same sum, pursuant to a deed of settlement dated 23 March 2009. The liquidator made an alternative claim against Mr Leggo, not exceeding the sum of $2,711,090, pursuant to s 588M(2) of the Corporations Act 2001 (Cth). Mr Leggo controls Nom De Plume. On 19 June 2014, Gardiner AsJ ordered the company to provide security for the defendants’ costs of the proceeding, the quantum of which is yet to be determined. The proceeding has been stayed for want of security for costs.

By interlocutory process filed 19 August 2014, the liquidator sought an order under s 477(2B) of the Act for approval to enter into a litigation funding agreement with Fingal Developments Pty Ltd and Ryeland Nominees Pty Ltd. Fingal and Ryeland are controlled by Mr Neville, who was a joint venture partner with Mr Leggo and others in a property development undertaken by the company. The purpose of the proposed funding arrangement is to enable him to conduct the proceeding against Nom De Plume and Mr Leggo, and presumably meet any obligations to provide security for costs.

Section 477(2B) of the Act provides:

Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf (for example, but without limitation, a lease or a an agreement under which a security interest arises or is created) if:
(a) without limiting paragraph (b), the term of the agreement may end; or
(b)obligations of a party to the agreement…

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 Ascot Vale Self Storage Centre Pty Ltd

Details

AGLC: Re Ascot Vale Self Storage Centre Pty Ltd [2015] VSC 751
Case: [2015] VSC 751
Decision Date: 22 December 2015

CaseChat Overview and Summary

The case of Re Ascot Vale Self Storage Centre Pty Ltd concerned an application by the liquidator of a company, seeking approval for a litigation funding agreement. The defendants, including a secured creditor acting as the litigation funder, objected to the application. The primary issue was whether the defendants had standing to challenge the liquidator's application, particularly given the potential impact on the company's assets and the interests of the unsecured creditors. The court had to determine whether the secured creditor's role as a litigation funder conferred sufficient standing to contest the validity of the security and the overall benefit to unsecured creditors. The court ultimately ruled that the secured creditor did not have standing to object, given the uncertainty of the benefit to unsecured creditors and the broader implications for the company's assets.

The court considered the statutory provisions under the Corporations Act 2001, specifically section 477(2B), which deals with the liquidator's discretion in entering into litigation funding agreements. It examined the nature of the relationship between the secured creditor and the company, the potential consequences of approving the funding agreement, and the interests of the unsecured creditors. The court found that while the secured creditor had a financial interest in the litigation, their standing was not sufficient to challenge the liquidator's decision when the benefits to unsecured creditors were uncertain. The court emphasised the need to protect the interests of all creditors and ensure that the liquidator's actions were in the best interests of the company as a whole.

The decision highlights the delicate balance between the rights of secured creditors and the broader obligations of liquidators to consider all creditors. By refusing the application, the court underscored the importance of maintaining a neutral stance in proceedings that could significantly impact the distribution of the company's assets. The ruling also reinforces the principle that liquidators must act in the best interests of the company and its creditors, even when faced with objections from parties with vested interests in the outcome.

The final orders of the court were to refuse the liquidator's application for approval of the litigation funding agreement, given the lack of standing of the defendants to object. The court's decision ensures that the liquidator remains focused on the equitable distribution of assets among all creditors, without undue influence from parties with potentially conflicting interests.

Orders