Re Iris Diversified Property Pty Ltd (in liq) - [2018] NSWSC 834

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Iris Diversified Property Pty Ltd (in liquidation) [2018] NSWSC 834
Hearing dates: 28 May 2018
Decision date: 06 June 2018
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
The resolution that the Second Defendant be removed as liquidator of the First Defendant put at a meeting of creditors of the First Defendant held on 16 November 2017 is taken to have been passed at that meeting. Messrs Bailey and Palmer be appointed as joint liquidators of the First Defendant. The Second Defendant to pay the Plaintiff’s costs of and incidental to these proceedings, as agreed or as assessed, without recourse to the assets of the First Defendant.

Catchwords: CORPORATIONS – application under s 75-41(3)(d) or s 75-43(4) of the Insolvency Practice Schedule (Corporations) for order that resolution to remove liquidator be treated as passed at meeting of creditors of company – where failure to pass that resolution was adverse to the interests of the creditors of the company as a whole – where failure to pass the resolution prejudiced, or is reasonably likely to prejudice, the interests of the creditor which voted against the proposal to an unreasonable extent – whether that resolution to remove liquidator should be treated as passed and order made for replacement liquidators to be appointed.
Legislation Cited: - Corporations Act 2001 (Cth) ss 503, 600A, Sch 2 ss 75-41, 75-43, 90-15, 90-35
Cases Cited: - Boral Resources (SA) Ltd v Rick Martin Nominees Pty Ltd (No 2) [2012] SASC 192
- Brisconnections Management Company Ltd v Burness [2009] FCA 626; (2009) 72 ACSR 233
- Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 156 FLR 453; 34 ACSR 391
- James, in the matter of Liquor National Pty Ltd (in liq) v Liquor National Pty Ltd (in liq) (No 2) [2017] FCA 1154
- Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407; (2008) 26 ACLC 497
- Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd [2016] NSWSC 1801
- Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079
- Redowood Pty Ltd v Goldstein Technology Pty Ltd [2004] NSWSC 317
- State of Victoria v Goulburn Administration Services (in liq) [2016] VSC 654
- Unifor Office Systems Aust Pty Ltd v Brewer Partnership Pty Ltd (1999) 17 ACLC 642
Category: Principal judgment
Parties: The Owners – Strata Plan 84741 (Plaintiff)
Iris Diversified Property Pty Ltd (in liquidation) (First Defendant)
Henry Peter McKenna (Second Defendant)
Representation:
Counsel:
R Glasson (Plaintiff)
R D Marshall SC/L Chapman (Second Defendant)
Solicitors:
O’Neill Partners (Plaintiff)
LAS Lawyers (Second Defendant)

File Number(s): 2017/359162

Judgment

By Amended Originating Process filed, by leave, on 28 May 2018 the Plaintiff, The Owners – Strata Plan 84741 (“Owners Corporation”), seeks orders to give effect to a resolution, previously not passed at a creditors’ meeting, for the removal of Mr Henry McKenna as…

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 834
Decision Date: 06 June 2018

CaseChat Overview and Summary

In the matter of Iris Diversified Property Pty Ltd (in liquidation), the liquidators sought an order under section 75-41(3)(d) or section 75-43(4) of the Insolvency Practice Schedule (Corporations) to treat a resolution to remove the liquidators as passed at a meeting of the creditors. The creditors of the company, Iris Diversified Property Pty Ltd, were in dispute over the effectiveness of the resolution to remove the liquidators. The central issue before the court was whether the resolution to remove the liquidators should be treated as passed at the meeting of creditors, given the circumstances of the voting and its potential impact on the creditors.

The court examined whether the failure to pass the resolution to remove the liquidators was adverse to the interests of the creditors of the company as a whole. The court also considered whether the failure to pass the resolution prejudiced, or was reasonably likely to prejudice, the interests of the creditor that voted against the proposal to an unreasonable extent. The court determined that the failure to pass the resolution had indeed prejudiced the interests of the creditor who voted against the removal to an unreasonable extent, as it had adverse implications for the interests of the creditors as a whole. Consequently, the court ruled that the resolution to remove the liquidators should be treated as passed.

The court's reasoning was based on the principle that the interests of the creditors of the company as a whole should be paramount. The court found that the failure to pass the resolution was not in the best interests of the creditors collectively and had prejudiced one creditor to an unreasonable degree. Thus, it was appropriate to treat the resolution as passed to protect the interests of the creditors. The court made an order that the resolution to remove the liquidators be treated as passed and directed that replacement liquidators be appointed. This decision ensured that the interests of all creditors were safeguarded in the administration of the liquidation process.

Orders