Re GVE Hampton Pty Ltd (in liq) - [2022] VSC 539

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2020 04437

IN THE MATTER OF GVE HAMPTON PTY LTD (IN LIQUIDATION) (ACN 167 150 521)

PETER GOUNTZOS AS LIQUIDATOR OF GVE HAMPTON PTY LTD (IN LIQUIDATION) (ACN 167 150 521) AND ANOTHER (ACCORDING TO THE ATTACHED SCHEDULE)	Plaintiffs
v
EUGENE KROK AND OTHERS (ACCORDING TO THE ATTACHED SCHEDULE)	Defendants

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JUDGE:	Connock J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 September 2022
DATE OF JUDGMENT:	7 September 2022 Ex tempore; revised reasons published 13 September 2022
CASE MAY BE CITED AS:	Re GVE Hampton Pty Ltd (in liq)
MEDIUM NEUTRAL CITATION:	[2022] VSC 539

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CORPORATIONS – Liquidation – Authority to enter into settlement agreement - Section 477(2A) of the Corporations Act 2001 (Cth) - Application by the liquidator for Court approval of a compromise – Whether there is a debt for the purpose of s 477(2A) – Where the liquidator has formed the view that compromise of the debt and entry into the settlement deed is in the best interests of creditors – Section 477(2A) general principles – Section 477(2A) relevant factors – Form of order – Court approval granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr C Moller and Ms R McCarthy	FCW Lawyers
For the Defendants	Mr P Tatti, solicitor	Aitken Partners Pty Ltd
For Shangri-La Construction Pty Ltd (a creditor)	Dr M Wolff	Noble Lawyers

HIS HONOUR:

Introduction and summary

The first plaintiff (Liquidator) as liquidator of the second plaintiff (Company) seeks approval pursuant to s 477(2A) of the Corporations Act 2001 (Cth) (Act) of a compromise of a debt of more than the $100,000 prescribed amount (Debt Compromise). Section 477(2A) applies by reason of the operation of s 506(1A) of the Act because on 4 December 2017 the Company was placed into a creditors’ voluntary winding up. The Liquidator does not seek a direction under s 90-15 of the Insolvency Practice Schedule to the Act (IP Schedule) that the Liquidator is justified in compromising the debt or entering into the settlement of which the Debt Compromise forms part.

The Debt Compromise is part of a broader settlement of the claims brought by the Liquidator and the Company against the defendants in this proceeding. The defendants include the Company’s directors and persons and entities associated with them who are alleged to have received payments or have been involved in transactions that it is alleged left the Company unable to pay its creditors. The broader settlement (Settlement) is recorded in a settlement agreement entered into in March 2022 (Settlement Agreement), as varied by a settlement variation agreement made on 7 September 2022 (Variation Agreement).

The Company is said to have six creditors (Creditors) as follows, with the three creditors marked with an asterisk being parties associated with one or more of the defendants:

Unsecured Creditors Total Amount

Deputy Commissioner of Taxation

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: [2022] VSC 539
Decision Date: 7 September 2022 Ex tempore; revised reasons published 13 September 2022

CaseChat Overview and Summary

The case involved GVE Hampton Pty Ltd, which was in liquidation, and was before the Federal Court. The liquidator of the company applied for approval of a compromise agreement. The compromise involved settling a debt that arose from a transaction between the company and another party. The liquidator argued that entering into the settlement agreement was in the best interests of the company's creditors and sought the Court's approval under section 477(2A) of the Corporations Act 2001 (Cth). The primary legal issue the Court had to determine was whether there existed a debt for the purpose of section 477(2A) of the Corporations Act and whether the compromise agreement was in the best interests of the creditors.

The Court examined the nature and existence of the debt and considered the principles and relevant factors outlined in section 477(2A). It was established that the debt was genuine and arose from a valid transaction. The Court assessed the liquidator's decision to compromise the debt, taking into account the potential benefits and drawbacks to the creditors. The Court applied the general principles and relevant factors under section 477(2A) to determine if the compromise was appropriate. The Court found that the liquidator had exercised his discretion appropriately, and the compromise was in the best interests of the creditors.

The Court approved the compromise agreement, allowing the liquidator to proceed with the settlement deed. The Court's decision was based on the existence of a genuine debt, the liquidator's proper exercise of discretion, and the best interests of the creditors. The Court's approval enabled the liquidator to effectively manage the company's assets and liabilities during the liquidation process. The Court's order granted the liquidator's application for approval of the compromise agreement, allowing the settlement deed to proceed as planned.

Orders