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Re Broens Pty Ltd (in liq)

Re Broens Pty Ltd (in liq)

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Broens Pty Limited (in liq) [2018] NSWSC 1747
Hearing dates: 2, 6 July 2018; 26 October 2018
Decision date: 15 November 2018
Before: Gleeson J
Decision:
(1)   The first plaintiff, Mr Trevor Pogroske, as liquidator of the second plaintiff, Broens Pty Ltd (in liq) ACN 600 877 790 (the Company), would be justified in making distributions to the creditors of the Company in advance of the determination of the appeal proceedings before the South Australian Employment Tribunal between Broens SA Pty Ltd and Inspector Hatchard (case no. 154/2018).

(2)   Mr Trevor Pogroske, as liquidator of the Company, would be justified in ignoring any claims of the former employees of the Company identified in the Schedule to these orders (the transferring employees) in respect of long service leave entitlements as at 27 January 2017 insofar as the transferring employees have either (a) not lodged a formal proof of debt making a claim against the Company for long service leave entitlements, or (b) have not sought to appeal the decision of the liquidator to reject that part of the proof of debt lodged by the transferring employee making a claim for long service leave entitlements.
(3)   The costs of the originating process be costs in the winding up of the Company.
Catchwords: CORPORATIONS – winding up – liquidators – application by liquidator for directions relating to distributions to creditors – Corporations Act 2001 (Cth), Sch 2 – Insolvency Practice Schedule (Corporations), s 90-15(3)(a) – where sale of the company’s assets and some employees transferred to the purchaser – dispute between liquidator and new employer concerning which employer was responsible for long service leave entitlements – where liquidator called for and ruled on proofs of debt from transferring employees – where no appeal brought against liquidator’s decision that no long service leave entitlements would be paid to transferring employees – where liquidator received legal advice which supported his decision – whether appropriate to give directions that liquidator is justified in making distributions to creditors ignoring any claims by the transferring employees for long service leave entitlements
Legislation Cited: Corporations Act 2001 (Cth), ss 439C(c), 446A(2), 479(3), 511, 560
Sch 2 – Insolvency Practice Schedule (Corporations), ss 90-15, 5-15(c)
Corporations Regulations 2001 (Cth), r 5.6.54
Fair Entitlements Guarantee Act 2012 (Cth)
Long Service Leave Act 1987 (SA), ss 3, 5, 12
South Australian Employment Tribunal Act 2014 (SA), ss 67, 68
Cases Cited: Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (1994) 49 FCR 334
Hitchin v Labourforce Solutions Pty Ltd [2009] SASC 85; (2009) 184 IR 262
In the Matter of ICS Real Estate Pty Ltd (in liq) [2014] NSWSC 479
Krejci (liquidator), in the matter of Community Work Pty Ltd (in liq) [2018] FCA 425
Meadow Springs Fairway Resort Ltd (in liq) v Balance Securities Ltd [2007] FCA 1443
Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re Glowbind Pty Ltd (in…

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

Case: [2018] NSWSC 1747
Decision Date: 15 November 2018

CaseChat Overview and Summary

The case of Re Broens Pty Ltd (in liq) involved the liquidator of the company, Broens Pty Ltd, who was in dispute with the new employer over the responsibility for long service leave entitlements of employees who were transferred to the purchaser of the company's assets. The matter was heard in the Federal Court of Australia. The liquidator had ruled that the new employer, not the company, was responsible for any long service leave entitlements owed to the transferring employees. The transferring employees did not appeal this decision, and the liquidator acted on the basis of legal advice that supported his position.

The central legal issue before the court was whether it was appropriate to grant directions to the liquidator that would justify him in making distributions to creditors, while disregarding any claims by the transferring employees for long service leave entitlements. This question turned on the interpretation of the Insolvency Practice Schedule (Corporations) and the statutory provisions governing the liquidator's duties and powers in the context of a winding up.

The court considered that the liquidator had exercised his discretion in accordance with the statutory framework and had acted on the basis of legal advice. Given that the transferring employees had not appealed the liquidator's decision, and that the liquidator had followed the correct procedure, the court held that it was appropriate to give the directions sought. The court found that the liquidator was justified in proceeding with distributions to creditors without paying any long service leave entitlements to the transferring employees.

The final orders of the court were that the liquidator was authorised to proceed with making distributions to creditors, disregarding any claims by the transferring employees for long service leave entitlements. This decision reinforced the principle that liquidators must act within the bounds of the law and their statutory powers, but also recognised the practical realities of winding up and the need to prioritise distributions to creditors.

Orders