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Re Octaviar Ltd (in liq)

Re Octaviar Ltd (in liq)

Case [2016] NSWSC 16 2 February 2016

Limitation Periods

Ratification of Past Conduct

Disqualification of Liquidators

Special Purpose Liquidators

Negotiation with Third Parties

Corporate Law & Governance

Insolvency Law

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Octaviar Limited (in liq); In the matter of Octaviar Administration Pty Limited (in liq) [2016] NSWSC 16
Hearing dates: 15 December 2015
Date of orders: 02 February 2016
Decision date: 02 February 2016
Before: Brereton J
Decision:
The court should not give directions under s 479(3) which have the effect of retrospectively ratifying what the OA Liquidators have already done. The OA Liquidators would be justified in proceeding henceforth on the basis that they validly entered into the Fortress Funding Deed and that that Deed was valid, effective and binding on OA, notwithstanding the judgment of the Court of Appeal. The OA Liquidators would be justified in adopting the position that OA is entitled to receive payments pursuant to clauses 7.2, 7.3 and 7.5 of the Fortress Funding Deed and should be given advice to that effect. The OA Liquidators would be justified in releasing the Castle Charge, and in not releasing, at least for the time being, the other charges assigned to OA by Fortress. To the extent that the GPLs may require leave to continue to act, where those charges have been assigned to OA, such leave should be granted. The OA Liquidators are entitled to negotiate with the Commissioner a resolution of OA’s liability as garnishee without reference to the SPL, and do not need a direction to do so. They should not be authorised to negotiate with the Commissioner, so as to bind OCV and to the exclusion of the SPL, in respect of the OCV Proof. The SPL’s powers should be expanded to include (a) calling for, assessing and administering any proof of debt lodged by OA in the estate of OCV, without previous limitations; (b) representing the interests of OCV in respect of any proof of debt that may be appropriate for it to lodge in the estate of OA (including by appealing the decision of Mr Fletcher and Ms Barnet as the liquidators of OA rejecting OCV’s proof dated 11 April 2011 for approximately $514m; and (c) representing exclusively the interests of OCV in respect of OCV’s claims to be a creditor of OA, and OA’s claims to be a creditor of OCV. The GPLs should be required to provide him with such assistance in the winding up of OCV as he reasonably requires in his capacity as SPL. There should not be any formal deferral of the SPL’s enlarged powers.

Catchwords:
PROCEDURE – judgments and orders – superior courts – where deed entered into in reliance on order later set aside on appeal – whether obligations under deed validly incurred – held, they were and remain valid effective and binding notwithstanding appellate judgment

CORPORATIONS – winding up – liquidators –application for directions – considerations relevant to giving directions – in respect of past conduct – in respect of uncontroversial commercial decisions – where directions sought in respect of past acts of liquidator – whether appropriate exercise of s 479(3) power…

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.

Continue reading Re Octaviar Ltd (in liq)

Details

AGLC: Re Octaviar Ltd (in liq) [2016] NSWSC 16
Case: [2016] NSWSC 16
Decision Date: 02 February 2016

CaseChat Overview and Summary

The case of Re Octaviar Ltd (in liq) involved the liquidators of Octaviar Ltd, a company in liquidation, and several other parties, including related corporations and the Australian Securities and Investments Commission. The dispute centred on the validity of obligations incurred under a deed, the appropriateness of ratifying past conduct of liquidators, the potential disqualification of liquidators, and the powers of special purpose liquidators. The case was heard in the Federal Court of Australia.

The primary legal issues before the court included whether the obligations under the deed were valid despite the appellate judgment that set aside the order on which the deed was entered, whether it was appropriate to ratify past conduct of the liquidators, whether the liquidators were disqualified from acting due to a related corporation obtaining an assignment of security over the assets, and whether the powers of special purpose liquidators should be expanded to allow them to independently represent the corporation in intercompany issues.

The court found that the obligations under the deed were valid and binding despite the appellate judgment that set aside the original order. The court held that it was not appropriate to ratify the past conduct of the liquidators under section 479(3) of the Corporations Act 2001. However, the liquidators were advised that they would be justified in acting in the future on the basis that the acts and obligations were valid and binding. Regarding the disqualification of the liquidators, the court found that the appointment of a special purpose liquidator meant that leave should be granted if required. Finally, the court held that the powers of the special purpose liquidators should be expanded to allow them to independently represent the corporation in all intercompany issues and refused a direction that would have allowed the general purpose liquidators to negotiate with a third party without reference to the special purpose liquidator.

The court's decision provides clarity on the validity of obligations under deeds entered into in reliance on orders later set aside, the ratification of past conduct of liquidators, the disqualification of liquidators, and the powers of special purpose liquidators in intercompany issues. The liquidators were advised that they would be justified in acting in the future on the basis that the acts and obligations were valid and binding, and the powers of special purpose liquidators were expanded to allow them to independently represent the corporation in all intercompany issues.

Orders