Re: James Dev. P/L (Administrators Appointed) - [1998] QSC 283

IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No. 10905 of 1998
Before the Hon. Mr Justice Mackenzie
[re: James Dev. P/L (Administrators Appointed)]
IN THE MATTER of the Corporations Law

and

IN THE MATTER of JAMES DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED)
ACN 074 173 470

JUDGMENT - MACKENZIE J.

Judgment delivered 17 December 1998
CATCHWORDS: CORPORATIONS - Management & Administration - application for administration to be brought to an end - conflict of interest - mortgagee’s power of sale.

Corporations Law ss.435A, 436C, 447A(2)
Aloridge Pty Ltd v Christianos (1994) 13 ACSR
Nambucca Investments Pty Limited v Star (1995) 13 ACLC 1
re Chilia Properties Pty Ltd (1997) 15 ACLC 966

Counsel:Mr P Hack for the applicant
Mr K Varley for the respondent

Solicitors:Primrose Cuper Cronin Rudigin for the applicant
Burwicks Wisewoulds for the respondent

IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No. 10905 of 1998
Before the Hon. Mr Justice Mackenzie
[re: James Dev. P/L (Administrators Appointed)]
IN THE MATTER of the Corporations Law

and

IN THE MATTER of JAMES DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED)
ACN 074 173 470

JUDGMENT - MACKENZIE J.

Judgment delivered 17 December 1998

This is an application by James Developments Pty Ltd (“James Developments”) for its administration under the Corporations Law to be brought to an end. It seeks an order pursuant to s.447A, which gives the court wide discretion to make orders in relation to companies under administration. Examples of situations where the power might be exercised to bring administration to an end, according to s.447A(2), are where the company is solvent or because the provisions of part 5.3A of the Law are being abused.
A brief history of relevant events is that on 29 September 1997, James Developments which owned land at Airlie Beach entered into a building contract with Nu-Steel Homes Australia Pty Ltd (“Nu-Steel”) for the construction of home units on the land for an agreed price of $M4.34. The contract price included a $100,000 management fee to James Developments Pty Ltd to be paid at the rate of $8,000 a month for 9 months and a final payment of $28,000 upon practical completion.
On 18 November 1997 James Developments entered into a loan agreement with Nu-Steel, which agreed to advance $M1.675. In return for this James Developments gave a fixed and floating charge over all of its assets and undertaking in favour of Nu-Steel and granted a mortgage over the land in its favour. The mortgage in favour of Nu-Steel ranks after mortgages in favour of McLaughlins Nominee Mortgage Pty Ltd (“McLaughlins”) and Ferraland Pty Ltd (“Ferraland”).
Construction of the units commenced in April 1998 but ceased in late July or early August 1998. To that point Nu-Steel had completed work to the value of $M1 and the estimate of the cost of completion was about $M3.63.
The heads of agreement also provided that Nu-Steel would progress the construction of 30 per cent complete before the first draw. On 6 July 1998 Rider Hunt Queensland Pty Ltd, the superintendent…

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: [1998] QSC 283
Decision Date: 17 December 1998

CaseChat Overview and Summary

The case involves James Developments Pty Ltd, which has sought an order to bring to an end its administration under the Corporations Law. The primary legal issues revolve around the enforceability of a charge in favour of Nu-Steel, the bona fides of the appointment of administrators, the presence of a conflict of interest, and the necessity of obtaining court leave for the appointment of Trevor John Schmierer as an administrator. James Developments argues that the charge was not enforceable, the appointment was not made in good faith, there was a conflict of interest, and Mr Schmierer was not permitted to appoint himself without court leave. The court found that the charge was enforceable, and while there was a potential for conflict, it did not justify setting aside the appointment. The court refused leave for Mr Schmierer to be appointed as an administrator but declared that Bradley Vincent Hellen could be appointed as a joint and several administrator. The application to end the administration was dismissed in all but one respect.

The court examined the enforceability of the charge in favour of Nu-Steel, which was held to be enforceable under clause 12(n) of the debenture. This clause triggered the right to appoint an administrator despite the lack of notice, as the exercise of the power of sale constituted an event of default. The court also assessed the bona fides of the appointment, noting that while there was a potential conflict of interest due to Mr Schmierer's dual role, it did not invalidate the appointment. The court concluded that James Developments had not demonstrated a prima facie case for removing the administrator. Consequently, the court refused leave for Mr Schmierer to be appointed and dismissed the application to end the administration, except as it related to Mr Schmierer's appointment.

Orders