Re Pindan Group Pty Ltd (Administrators Appointed) [No 3] - [2021] WASC 480

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   RE PINDAN GROUP PTY LTD (ADMINISTRATORS APPOINTED) AND ORS [No 3] [2021] WASC 480
CORAM:   STRK J
HEARD:   16 DECEMBER 2021
DETERMINED       :   16 DECEMBER 2021
DELIVERED          :   24 DECEMBER 2021
FILE NO/S:   COR 102 of 2021
MATTER:   IN THE MATTER OF PINDAN GROUP PTY LTD (ADMINISTRATORS APPOINTED)

EX PARTE
VINCENT ANTHONY SMITH, COLBY RHYS O'BRIEN AND SAMUEL JOHN FREEMAN, as joint and several administrators of PINDAN GROUP PTY LTD (ADMINISTRATORS APPOINTED) ACN 611 922 386
Plaintiff

Catchwords:

Corporations law - External administration - Application by the administrators pursuant to the Corporations Act 2001 (Cth) s 447A seeking an order as to how Pt 5.3A is to operate in relation to a particular company in administration - Meeting of creditors convened in accordance with s 439A of the Corporations Act 2001 (Cth) - Incorrect term sheet appended to the supplementary report to creditors issued pursuant to the Insolvency Practice Rules (Corporations) 2016, r 75-225(3) - Resolution at a second meeting of creditors to execute a deed of company arrangement - Whether the proposed order has a nexus with how Pt 5.3A is to operate in relation to the company - Exercise of discretion

Legislation:

Corporations Act 2001 (Cth), s 447A, and sch 2 (Insolvency Practice Schedule (Corporations)), s 105-1
Insolvency Practice Rules (Corporations) 2016, r 75-225(3)
Rules of the Supreme Court 1971 (WA), O 3 r 5
Supreme Court (Corporations) WA Rules 2014, r 1.10

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

J Hynes and F Tao

Solicitors:

Plaintiff

Squire Patton Boggs

Case(s) referred to in decision(s):

AFG Insurances Ltd (2002) 20 ACLC 1588; [2002] NSWSC 735
Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270
BE Australia WD Pty Ltd (subject to a deed of company arrangement) & Ors v Sutton (2011) 82 NSWLR 336; [2011] NSWCA 414
Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607
Correa v Whittingham (2013) 278 FLR 310; [2013] NSWCA 263
Honest Remark Pty Ltd v Allstate Explorations NL (2006) 234 ALR 765
Kruger; Re Kruger Engineering Pty Ltd (2006) 60 ACSR 191; [2006] NSWSC 1063
R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170
Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602
Re New Tel Ltd (2004) 210 ALR 270
Re Pindan Group Pty Ltd (Administrators Appointed) and Ors [2021] WASC 347
Re Pindan Group Pty Ltd (Administrators Appointed) and Ors [No 2] [2021] WASC 358

STRK J:

Introduction

Samuel John Freeman, Colby Rhys O'Brien and Vincent Anthony Smith (together the plaintiffs) are the joint and several administrators of Pindan Group Pty Ltd (administrators appointed) ACN 611 922 386.
On 25 November 2021, the plaintiffs issued a supplementary report to the creditors of Pindan Group prior to the second meeting of creditors. The second meeting was to be reconvened on 3 December 2021. The supplementary report described a revised deed of company arrangement (DOCA) proposal, that…

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: [2021] WASC 480
Decision Date

CaseChat Overview and Summary

In the case of Re Pindan Group Pty Ltd (Administrators Appointed) [No 3], the dispute centred on the powers of a court under section 447A of the Corporations Act 2001 (Cth) to make orders regarding the operation of Part 5.3A of the Act in relation to a particular company. The case involved the Pindan Group, a company that had been placed into external administration, and the application of a court's powers under s 447A to address certain procedural irregularities in the administration process.

The primary legal issue before the court was the extent of the discretionary power granted to the court by s 447A, particularly whether the power was plenary or subject to certain constraints. The plaintiffs argued that the power was broad and could be exercised in any manner deemed just by the court, while the defendants contended that the power was limited to achieving the objects of Part 5.3A of the Corporations Act, as stated in s 435A.

The court considered the established principles regarding the exercise of s 447A powers, including the need for any order to have a nexus with the operation of Part 5.3A in relation to the company in question. The court found that while the power was broad, it was not unlimited and must be exercised for the purpose for which it was granted, which is to achieve the objects of Part 5.3A. The court concluded that any order made under s 447A must be designed to achieve these objects in relation to the particular company. The court further held that the power was constrained by the language of the statute, its subject matter and objects, and the consequences of a decision that the power had been exceeded.

The court's decision established that the power under s 447A is not plenary but is subject to the constraints outlined in the Corporations Act. The court emphasised that any order made under s 447A must be designed to achieve the objects of Part 5.3A and must have a nexus with the operation of Part 5.3A in relation to the particular company. The court's reasoning and decision provide important guidance on the scope and exercise of s 447A powers, ensuring that they are used in a manner consistent with the statutory objectives and constraints.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

While the power is broad, it is not unlimited.[15] It is well established that the power vested in a court by s 447A is a statutory power which may be exercised only for the purpose for which it was granted.[16] As was noted by Brereton J in Honest Remark Pty Ltd v Allstate Explorations NL at [66], in reliance on Re New Tel Ltd at [7], 'an order under s 447A must have a nexus with how Pt 5.3A is to operate in relation to a particular company'.[15] Correa v Whittingham (2013) 278 FLR 310; [2013] NSWCA 263 at [2] - [8] , [97] - [105] and [304]; citing Honest Remark Pty Ltd v Allstate Explorations NL (2006) 234 ALR 765 and Re New Tel Ltd (2004) 210 ALR 270 at [3].[16] R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170, cited in Correa v Whittingham [4]. Further, Barrett JA in Correa v Whittingham at [4] observed:The 'nexus' with the operation of Pt 5.3A to which reference is made in the decided cases must be understood accordingly. The relevant purpose is to be ascertained by reference to the language of the statute, its subject matter and objects and the consequences of a decision that the power has been exceeded: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. The principal source of constraint and limitation upon the power is therefore the statement of the object of Pt 5.3A in s 435A, coupled with the nature, incidents and aims of the particular form of external administration as gathered from the provisions of Pt 5.3A as a whole. I accept that any order granted pursuant to s 447A must be designed to achieve in relation to a particular company the objects of Pt 5.3A as stated in s 435A of the Corporations Act.[17][17] Correa v Whittingham [4]. As to the scope of the power vested in a court by s 447A, counsel for the plaintiffs submitted that the section confers 'plenary powers' on the court 'to do whatever it thinks is just in all the circumstances' having regard to the rights of the various groups of persons affected by an administration.[18] Counsel also noted that the power under s 447A has been frequently deployed by courts to attend to irregularities in procedural steps which have consequential flow-on effects. Such instances include validating premature or late convened meetings of creditors in order to ensure that resolutions passed at those meetings were effective.[19] [18] Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607 (per Young J) at 611, cited in the plaintiffs' submissions par 18.[19] Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; and Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602, cited in the plaintiffs' submissions par 19. Prior to the hearing of the application, I asked that counsel consider and address AFG Insurances Ltd (2002) 20 ACLC 1588; [2002] NSWSC 735. I referred counsel to [23] of the decision of Barrett J, where after noting the comprehensive operation of s 447A accepted by the High Court in Australasia Memory Pty Ltd v Richard Campbell Brien, Barrett J made the following observation:Section 447A(1) appears in Pt 5.3A. It empowers the court to make orders 'about how this Part is to operate in relation to a particular company'. Such an order may modify the operation of a statutory provision, in so far as it already operates or will in future operate upon or in relation to a particular company, provided that the provision in question is located in Pt 5.3A. It seems to me to be clear from the joint judgment in Australasian Memory that, before any order can properly be made under s. 447A(1), it is necessary to identify the Pt 5.3A provision (or the effect produced, or to be produced, by a Pt 5.3A provision) the operation of which is to be modified and then to articulate the modification that the order is to achieve. I do not think it is possible to identify any Pt 5.3A provision as relevant for present purposes; and none was suggested in the course of submissions. Section 581(4) is, of course, in Pt 5.6.