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Re Dalma No 1 Pty Ltd (in liq)

Re Dalma No 1 Pty Ltd (in liq)

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Case Copied 17 September 2013 30 min read

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Dalma No 1 Pty Limited (in liquidation) (ACN 111 772 260); Application of Bruce Gleeson and David Shannon in their capacity as joint and several liquidators of Dalma No 1 Pty Limited (in liquidation) and anor [2013] NSWSC 1335
Hearing dates: 9 September 2013
Decision date: 17 September 2013
Jurisdiction: Equity Division - Corporations List
Before: Brereton J
Decision:
Answers provided to questions in originating process:
(a) No
(b) No
(c) Does not arise.
(d) Does not arise.

Catchwords:
CORPORATIONS - EXTERNAL ADMINISTRATION - Winding up - priorities - subrogation - Where third party voluntarily paid certain employee entitlements owing by company after date on which winding up deemed to have commenced - whether third party entitled to be subrogated, pursuant to Corporations Act 2001 s 560, to priority position enjoyed by employees in respect of liabilities of the company that it had discharged - No entitlement to subrogation per s 560 because company in liquidation did not pay the employee related liabilities using monies lent to it by third party, instead, the third party paid those liabilities directly itself.
EQUITY - SUBROGATION - Whether Corporations Act 2001 s 560 leaves any room for operation of equitable doctrine of subrogation - section 560 creates right of subrogation where one would not otherwise exist - in context of liquidation, equitable subrogation not excluded by provisions of Corporations Act - whether requirements for equitable subrogation satisfied - only context in which spontaneous voluntary payment by a third party may found a claim for subrogation is in exceptional category of the payment off of existing securities - basis for equitable subrogation not established because third party made payments spontaneously and voluntarily, in absence of any circumstances affecting the company's conscience.
Legislation Cited: (Cth) Corporations Act 2001, s 439A, s 445F, s 511(1)(a), s 513B(b), s 556, s 560, s 561
Cases Cited: Aetna Life Insurance Co v Middleport 124 US 534 (1888)
B Liggett (Liverpool), Ltd v Barclays Bank, Ltd [1928] 1 KB 48
Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269
Boscawen v Bajwa [1995] 4 All ER 769
Butler v Rice [1910] 2 Ch 277
Campbell Auto Finance Co v Warren [1933] 4 DLR 509
Capt'n Snooze Management Pty Limited v McLellan [2002] VSC 432
Carter, Re Damilock Pty. Limited (in liquidation) [2012] FCA 1445
Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072; (2003) 12 BPR 222,57
Chetwynd v Allen [1899] 1 Ch 353
Cochrane v Cochrane (1985) 3 NSWLR 403
Cook (as liquidators of Italiano Family Fruit Co Pty Limited (in liquidation)) v Italiano Family Fruit Co Pty Limited (in liquidation) [2010] FCA 1355
Coptic Ltd v Bailey [1972] Ch 446; [1972] 1 All ER 1242
Exall v Partridge (1799) 8 Term Rep 308
Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234
Ghana Commercial Bank v Chandiram [1960] AC 732
Hart v Barnes; Deputy…

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: [2013] NSWSC 1335
Decision Date: 17 September 2013

CaseChat Overview and Summary

The case of Re Dalma No 1 Pty Ltd (in liq) involved the liquidator of a company seeking to determine the rights of a third party who had paid certain employee entitlements after the company was deemed to be in liquidation. The court was tasked with deciding whether the third party was entitled to be subrogated to the priority position of employees in respect of the liabilities owed by the company. The matter was heard in the Federal Court of Australia.

The primary legal issue before the court was whether the third party could be subrogated to the priority position of employees under section 560 of the Corporations Act 2001. The court also considered whether the statutory right of subrogation under section 560 precluded the operation of the equitable doctrine of subrogation in this context. Additionally, the court examined whether the requirements for equitable subrogation were satisfied, particularly in light of the third party's voluntary and spontaneous payment of the employee entitlements.

The court found that the third party was not entitled to be subrogated under section 560 because the company had not paid the employee-related liabilities using monies lent by the third party; instead, the third party made the payments directly. The court held that section 560 creates a right of subrogation where one would not otherwise exist and, in the context of liquidation, the equitable doctrine of subrogation was not excluded by the Corporations Act. However, the court determined that the basis for equitable subrogation was not established as the third party made the payments spontaneously and voluntarily, without any circumstances affecting the company's conscience.

The court's decision concluded that the third party could not claim subrogation in either statutory or equitable terms. The final orders reflected this determination, affirming that the third party had no entitlement to be subrogated to the priority position of employees in respect of the company's liabilities.

Orders