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Re Kevin Jacobsen Pty Ltd (in liq)

Re Kevin Jacobsen Pty Ltd (in liq)

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Case Copied 29 April 2016 60 min read

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Kevin Jacobsen Pty Limited (in liquidation) [2016] NSWSC 538
Hearing dates: 5 April 2016
Decision date: 29 April 2016
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
Stand over application to allow liquidators an opportunity to lead further evidence of any inquiries as to proposed assignee’s capacity to fund proceedings.

Catchwords: CORPORATIONS — Winding up — Liquidators — Deed of assignment — Application for approval of deed of assignment under s 477(2B) of the Corporations Act 2001 (Cth) – where liquidators by way of deed assigned certain causes of action of company on basis that assignee would pay a percentage of recoveries upon successful litigation to the company – where there were no other alternatives available to liquidators that offered prospects of return to creditors – whether the Court should approve entry into deed – whether the Court should assess assignability of causes of action before granting approval – whether the Court should refuse approval given insufficiency of evidence as to assignee’s ability to prosecute proceedings to completion – whether assignment will result in vexatious and improper litigation – whether liquidators should have assessed merits of relevant claims prior to entry into deed in circumstances of unfunded liquidation – whether the Court should give approval nunc pro tunc where liquidators failed to obtain approval prior to entry into deed – whether leave should be granted under s 477(2B) of the Corporations Act 2001 (Cth).
Legislation Cited: - Australian Securities and Investments Commission Act 2001 (Cth), ss 12GF, 12GM
- Corporations Act 2001 (Cth), ss 477, 506, 545, 588FB, 1041I, 1322
- Trade Practices Act 1974 (Cth), ss 82, 87
Cases Cited: - Anderson v McPherson (No 2) [2012] WASC 19
- Aquatic Air Pty Ltd v Siewert [2015] NSWSC 928
Bank of Melbourne Ltd v HPM Pty Ltd (in liq) (1997) 26 ACSR 110
- Australia and New Zealand Banking Group Ltd v Dzienciol (by his guardian ad litem Dzienciol) [2001] WASC 305
- Chamberlain v RG & H Investments Pty Ltd (No 2) [2009] FCA 1531; (2009) 76 ACSR 415
- Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38
- Gerard Cassegrain & Co Pty Ltd [2013] NSWSC 257
- Hutchison v Hillcrest Litigation Services Ltd [2010] NSWSC 934
- Jones, Saker, Weaver and Stewart (liquidators), Re; Great Southern Ltd (in liq) (recs and mgrs apptd) [2012] FCA 807
- Leigh; Re AP & PJ King Pty Ltd (in liq) [2006] NSWSC 315
- Owners of Strata Plan 5290 v CGS & Co Pty Ltd [2011] NSWCA 168
- Pascoe; Re Matrix Group Ltd (in liq) [2011] FCA 1117
- Re 7 Steel Distribution Pty Ltd (in liq) (recs and mgrs apptd) [2013] NSWSC 669
- Re ACN 076 673 875 Ltd [2002] NSWSC 578; (2002) 42 ACSR 296
- Re Addstone Pty Ltd (in liq) (1998) 83 FCR 583; 16 ACLC 1320
-…

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: [2016] NSWSC 538
Decision Date: 29 April 2016

CaseChat Overview and Summary

Re Kevin Jacobsen Pty Ltd (in liq) involved the liquidators of a company seeking approval from the Court for a deed of assignment under section 477(2B) of the Corporations Act 2001 (Cth). The liquidators had assigned certain causes of action of the company to a third party on the condition that the third party would pay a percentage of any recoveries to the company. The application was brought before the Court as there were no other viable options available to the liquidators that offered any chance of return to the company's creditors. The primary legal issues the Court had to resolve were whether the deed should be approved, whether the Court needed to assess the assignability of the causes of action before granting approval, and whether the Court should refuse approval due to insufficient evidence of the assignee's capacity to complete the litigation successfully. Additionally, the Court had to consider whether the assignment would lead to vexatious or improper litigation, whether the liquidators should have evaluated the merits of the claims before entering the deed, and whether the Court should grant approval nunc pro tunc because the liquidators did not obtain prior approval.

The Court, in its reasoning, found that the assignment deed was not assignable as it did not comply with the requirements of the Corporations Act. The Court also determined that there was insufficient evidence provided to establish that the assignee had the ability to successfully prosecute the litigation to its conclusion. Furthermore, the Court concluded that the assignment could result in vexatious and improper litigation. The Court found that the liquidators should have assessed the merits of the claims before entering into the deed, especially in the context of an unfunded liquidation. Finally, the Court decided not to grant approval nunc pro tunc, as it was not satisfied that the liquidators had acted appropriately in failing to obtain prior approval for the deed. The Court refused to grant leave under section 477(2B) of the Corporations Act 2001 (Cth).

Orders