Re John Pettit Pty Limited (Subject to a Deed of Company Arrangement)
[2014] NSWSC 728
•03 June 2014
Supreme Court
New South Wales
Medium Neutral Citation: Re John Pettit Pty Limited (Subject to a Deed of Company Arrangement) [2014] NSWSC 728 Hearing dates: 2 June 2014 Decision date: 03 June 2014 Jurisdiction: Equity Division Before: Lindsay J Decision: (1) An order (in the nature of judicial advice) made under s 447D of the Corporations Act 2001 Cth in relation to a proposed sale of property.
(2) An order made under s 447A of the Act varying the operation of Part 5.3A (s 444F) so as to limit the liability of Deed Administrators in relation to property sold as property of the Company without notice of an adverse claim.
Catchwords: CORPORATIONS - Voluntary Administration - Deeds of Company Arrangement - Generally - Appliation for an order (in the nature of judicial advice) under s 447D of the Corporations Act 2001 (Cth) - Application for an order under s 447A of the Act to vary the operation of Part 5.3A so as to limit the liability of Deed Administrators in relation to property sold as property of the company without notice of an adverse claim Legislation Cited: Corporations Act 2001 (Cth) Category: Principal judgment Parties: Shaun Robert Fraser and Anthony Gregory McGrath in their capacity as Deed Administrators of John Pettit Pty Limited (Subject to a Deed of Company Arrangement) (First Plaintiffs)
John Pettit Pty Limited (Subject to a Deed of Company Arrangement) (Second Plaintiff)Representation: Counsel:
Michael Izzo (Plaintiffs)
Solicitors:
Corrs Chambers Westgarth (Plaintiffs)
File Number(s): 2014/00153128
Judgment
INTRODUCTION
The first plaintiffs (Shaun Fraser and Anthony McGrath) are Deed Administrators of the second plaintiff, John Pettit Pty Limited (Subject to a Deed of Company Arrangement).
By an originating process filed on 21 May 2014 the plaintiffs, on an ex parte basis, make separate but interrelated applications under the Corporations Act 2001 (Cth):
(a) The Deed Administrators apply for directions under s 447D.
(b) Both the Deed Administrators and the Company apply for an order under s 447A that the operation of Part 5.3A of the Act be varied in relation to the Company.
The occasion for both applications is a practical need to facilitate an orderly disposal of property (rare bank notes), in possession of the Company, that may be the subject of claims of ownership by strangers, presently unknown to the Deed Administrators despite their endeavours to identify all competing claims to ownership of the property.
Subject to the outcome of these proceedings, the Deed Administrators have made arrangements to sell the subject property, between 15-31 July 2014, through three auction houses: Spink & Sons; Downies; and Noble Numismatics.
The relief sought by the Deed Administrators under s 447D is a direction, in the nature of judicial advice, that the Deed Administrators would be justified in adoption of a programme for the sale of the subject property, after advertising, followed by an application of proceeds of sale by reference to the Deed of Company Arrangement in respect of the Company.
The relief sought by the Deed Administrators and the Company under s 447A is an order for variation of s 444F of the Corporations Act so as to limit the personal liability of the Deed Administrators to any owner of the subject property who has not notified a claim in respect of that property by one business day prior to its sale.
The Deed Administrators are concerned to minimise their potential exposure to personal liability if they sell a valuable item of property which is subsequently proved to be owned by someone other than the Company.
COMPANY HISTORY
The Company was incorporated on 19 June 1995.
The principal of the Company throughout its existence has been Mr John Peter Pettit, for whom the Company is named. He holds all but one of the Company's 5,000 shares. He is its sole director and shareholder.
Pursuant to s 436A of the Corporations Act, the first plaintiffs were appointed voluntary administrators of the Company on 11 October 2012.
On 28 November 2012 the Company's creditors resolved (pursuant to ss 439A and 439C of the Corporations Act) that the Company execute a deed of company arrangement, with the first plaintiffs as deed administrators.
The deed was executed on 18 December 2012.
Before it entered voluntary administration, the Company (under the day-to-day management of Mr Pettit, assisted by two administrative staff) was engaged in the business of rare bank note dealings.
That business involved three elements:
(a) First, the Company's principal assets were (and still are) its holding of a large number of rare bank notes, from which it generated revenue from trading those notes.
(b) Secondly, the Company generated revenue through consignment commissions it received on sales of rare bank notes, owned by third parties, effected by way of private sales or sales through auction houses.
(c) Thirdly, the Company acted as a custodian, holding notes on behalf of third party owners for safe keeping.
As a consequence of its consignment dealings and custodial arrangements, at the time it entered voluntary administration the Company had notes in its possession which were owned by third parties.
The Deed Administrators have found that, despite substantial endeavours, they have not been able to exclude the possibility that some bank notes still within the possession of the Company belong to owners other than the Company.
The Company's records have proven inadequate to the task, even with the involvement of Mr Pettit in it. The Company has no list of customers, no asset register, no creditor or debtor ledgers. Records of the ownership of particular bank notes have, at times, comprised nothing more secure than loose envelopes and rough pieces of paper noting ownership interests. Mr Pettit's memory has proven to be fallible, both incomplete and inaccurate.
The Deed Administrators presently have approximately 2,400 individual bank notes that they propose to sell, subject to the outcome of these proceedings.
It is not necessary to record anything about the value of those notes beyond an acknowledgement that, collectively, they are estimated to have a substantial value.
The Deed Administrators seek to realise the assets of the Company, and to provide a return to creditors, in an orderly way.
The steps that they have undertaken since their appointment as voluntary administrators to verify the ownership of bank notes in the possession of the Company have included:
(a) a review of the documentary records of the Company, including its books and records;
(b) correspondence with the Company's accountants;
(c) procurement of a Report as to Affairs from Mr Pettit;
(d) inquiries made of financial institutions, including bank records and statements issued by the Company's bank;
(e) inquiries of auction houses holding bank notes of the Company on consignment;
(f) meetings and correspondence with Mr Pettit and his administrative staff;
(g) searches of the Personal Property Securities Register; and
(h) publication of details relating to the conduct of the affairs of the Company.
The Deed Administrators have, amongst other things, sent at least three circulars to creditors (on 15 October, 2012, 7 November, 2012 and 12 March 2014); advertised for claims in The Australian Financial Review on 6 March 2014; and published an advertisement in the April 2014 edition of the specialist magazine, Australian Coin and Bank Note Magazine.
In accordance with their usual practice the Deed Administrators have caused the staff at their firm (McGrath Nicol) to set up a page on the firm's website in relation to the administration of the Company. The URL for that webpage is: type="1">
The Deed Administrators' advertisements have elicited a number of inquiries, but, in the nature of the case, they have not allowed the Deed Administrators to exclude the possibility that, despite the passage of time since their first appointment, there may still be claims made to individual bank notes currently in the possession of the Company.
I am satisfied that it is appropriate to grant the relief sought by the plaintiffs. The Deed Administrators have taken substantial, reasonable steps to identify potential third party claims on property in the possession of the Company by persons unknown, and ostensibly unknowable, by them. The orders are designed to facilitate an orderly realisation of property for the benefit of creditors, with reasonable protection for such, if any, third party claimants there may still be and reasonable, personal protection for Deed Administrators engaged in performance of official duties. The passage of time since the Company entered administration, together with repeated advertisements published by the Deed Administrators, lends comfort to the adoption of orders designed to enable the affairs of the Company to be advanced in a prudential way.
Accordingly, I make the following orders:
(1) Direct that the first plaintiffs would be justified in:
(a) dealing with the bank notes identified in Tab 4 of Exhibit SRF-1 to the affidavit of Shaun Robert Fraser affirmed on 21 May 2014 ("Unclaimed Notes") as the property of the second plaintiff;
(b) causing the Unclaimed Notes or any of them to be sold by public auction after causing to be published in The Australian Financial Review, at least five days before the auction, advertisements advising of the proposed auction of the Unclaimed Notes which include information substantially in terms of the notice contained at Tab 22 and Tab 23 of Exhibit SRF-1 to the affidavit of Shaun Robert Fraser affirmed on 21 May 2014;
(c) causing the Unclaimed Notes or any of them to be sold by private sale after causing to be published in The Australian Financial Review, at least five days before the sale, advertisements advising of the proposed sale of the Unclaimed Notes which include information substantially in terms of the notice contained at Tab 22 and Tab 23 of Exhibit SRF-1 to the affidavit of Shaun Robert Fraser affirmed on 21 May 2014; and
(d) applying the proceeds of sale of the Unclaimed Notes:
(i) towards the payment of the Deed Administrators' costs incurred in connection with realising the Unclaimed Notes;
(ii) towards satisfying any valid claim against the second plaintiff in respect of the Unclaimed Notes; and
(iii) after a period of three months, distributing the balance of the proceeds of sale in accordance with the requirements of the Deed of Company Arrangement in respect of the second plaintiff,
subject to the first plaintiffs' having complied with order 1(b) and/or order 1(c) above.
(2) Order that the operation of Part 5.3A of the Corporations Act be varied by a variation of s 444F of the Act so as to limit the personal liability of the first plaintiffs, to any owner of Unclaimed Notes who has not notified his, her or its claim in respect of such notes by one business day prior to their sale, to the amount of funds available to the first plaintiffs to meet such liability from the Deed Fund established under clause 9.1 of the Deed of Company Arrangement in respect of the second plaintiff.
(3) Order that the first plaintiffs' costs of the originating process be costs in the Deed Administration of the second plaintiff.
(4) Reserve to any person affected by these orders liberty to apply on three days' notice.
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Decision last updated: 04 June 2014
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