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Re Bellafountain Pty Ltd

Re Bellafountain Pty Ltd

Case [2017] NSWSC 391 11 April 2017

Limitation Periods

Independence

Bias

Corporate Law & Governance

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Bellafountain Pty Ltd [2017] NSWSC 391
Hearing dates: 23 March and 4 April 2017
Decision date: 11 April 2017
Before: Gleeson JA
Decision:
(1) Order, pursuant to s 477(2B) of the Corporations Act 2001 (Cth) approving the plaintiff as liquidator of Bellafountain Pty Ltd (in liq) entering into the agreements referred to in the schedule on behalf of the company, notwithstanding that the terms of the agreement may end and/or obligations of parties to the agreement may, according to the terms of the agreement, be discharged more than three months after the agreement is entered into.
(2)   Order that the liquidator’s costs and expenses of this application be costs and expenses in the liquidation.
(3)   Direct these orders be entered forthwith.

Schedule
(a)   An agreement in or substantially to the effect of the costs agreement between the plaintiff and Kent Attorneys as set out in annexure “Q” to the affidavit of Angus Carnegie Gordon sworn 9 March 2017.
(b)   An agreement in or substantially to the effect of the costs agreement between the plaintiff and Kent Attorneys as set out in annexure “R” to the affidavit of Angus Carnegie Gordon sworn 9 March 2017.
Catchwords: CORPORATIONS – application by liquidator for approval of entry into contracts of more than three months duration under Corporations Act s 477(2B) – where objection by directors and related party creditors to liquidator retaining solicitors who have previously acted for the petitioning creditor – whether retention of solicitors compromises independence of liquidator – whether reasonable apprehension of bias if liquidator retains those solicitors.
Legislation Cited: Corporations Act 2001 (Cth), ss 459G, 477(2B), 596A, 596B, 597
Corporations Rules, r 2.13(1)
Cases Cited: Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230
Australian Property Holdings Custodian Limited v Capital Finance Australia Ltd and Ors [2012] VSC 124
Commonwealth Bank of Australia v Fernandez (2011) ACSR 262
Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd [2016] NSWSC 1801
Re Anglican Development Fund Diocese of Bathurst Board (recs and mgrs apptd) [2015] NSWSC 6
Re Biposo Pty Ltd; ex parte Condon v Rogers (1995) 120 FLR 404
Re Colorado Products Pty Limited (in prov liq) [2013] NSWSC 1613
Re G A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308
Re HIH Insurance Ltd [2004] NSWSC 5
Re HIH Overseas Holdings Ltd (in prov liq) [2001] NSWSC 426
Re Kala Capital Pty Ltd (in liq) [2012] NSWSC 1073
Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513
Re Mustang Marine Australia Services Pty Limited [2012] NSWSC 620
Re National Safety Council of Australia, Victorian Division [1990] VR 29
Re Smarter Way (2000) 35 ACSR 595
Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83
State Bank (NSW) v Turner Corporation Ltd (1994) 14 ACSR 480
Category: Principal judgment
Parties: Angus Carnegie Gordon as Liquidator of Bellafountain Pty Ltd (Plaintiff)

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 Bellafountain Pty Ltd

Details

AGLC: Re Bellafountain Pty Ltd [2017] NSWSC 391
Case: [2017] NSWSC 391
Decision Date: 11 April 2017

CaseChat Overview and Summary

Bellafountain Pty Ltd was in liquidation, and the liquidators applied for approval to enter into contracts exceeding three months in duration under section 477(2B) of the Corporations Act. The directors and certain creditors objected to the liquidators retaining the same solicitors who had previously acted for the creditor who presented the winding-up petition. The objectors argued that the retention of the solicitors by the liquidators could compromise their independence and create a reasonable apprehension of bias. The court was required to determine whether the liquidators' retention of the solicitors would indeed compromise their independence and create a reasonable apprehension of bias.

The court examined the nature of the relationship between the solicitors and the liquidators and considered the potential for bias or compromise of independence. The court noted that the solicitors had previously acted for the petitioning creditor but had not been involved in the winding-up proceedings themselves. The court also considered the liquidators' independence and the potential for bias based on the circumstances of the case. The court found that there was no reasonable apprehension of bias and that the liquidators' retention of the solicitors did not compromise their independence. The court approved the liquidators' application to enter into the contracts of more than three months duration.

The court's decision was based on the specific circumstances of the case and the lack of evidence of any actual bias or compromise of independence. The court found that the liquidators' retention of the solicitors did not create a reasonable apprehension of bias and that the liquidators' independence was not compromised. The liquidators were therefore approved to enter into contracts exceeding three months in duration. The court's decision provides guidance to liquidators and creditors in similar situations and highlights the importance of considering the potential for bias and compromise of independence when appointing solicitors.

Orders