Re Sovereign MF Ltd (in liquidation) - [2014] VSC 681

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST

S CI 2014 02853

SOVEREIGN MF LTD ACN 104 694 555 (IN LIQUIDATION)	Plaintiff
v
PAUL VARTELAS IN HIS CAPACITY AS ADMINISTRATOR OF 668 SECRETARIAT PTY LTD 130 794 704 (ADMINISTRATORS APPOINTED) & ORS	Defendants

– AND –

S CI 2014 02855

SOVEREIGN MF LTD ACN 104 694 555 (IN LIQUIDATION)	Plaintiff
v
PAUL VARTELAS IN HIS CAPACITY AS ADMINISTRATOR OF EOS JANUS CAPITAL PTY LTD ACN 142 206 308 (ADMINISTRATORS APPOINTED) & ORS	Defendants

EX TEMPORE

JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 June 2014
DATE OF RULING:	17 June 2014
CASE MAY BE CITED AS:	Re Sovereign MF Ltd (in liquidation)
MEDIUM NEUTRAL CITATION:	[2014] VSC 681

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INSOLVENCY – Administrator appointed – Creditor lodged proof of debt for a liquidated sum – Debt disputed by company in administration – Administrator held doubt whether proof of debt should be admitted or rejected – Administrator admitted proof for $1 – Held administrator was obliged under regulation 5.6.26 of the Corporations Regulations2001 (Cth) to mark the proof as objected to and allow the creditor to vote subject to the vote being declared invalid if the objection was sustained – Administrator was not entitled to exercise powers under regulation 5.6.23 to make an estimate of the value of the debt – Resolutions against removing the administrator set aside and administrators nominated by the creditor appointed – Young v Sherman [2001] NSWSC 1020 and Selim v McGrath [2003] NSWSC 927 considered – Orders made under section 1321 Corporations Act2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Fary	Maddocks Lawyers
For the Defendants	Mr M Gronow	Irlicht & Broberg Lawyers

HIS HONOUR:

I have before me two applications, both commenced by originating process, that seek similar relief and rely on the same evidentiary material.

In the first matter, No 2853 of 2014, the plaintiff is Sovereign MF Limited (in liquidation) (Sovereign) and the first defendant is Mr Paul Vartelas in his capacity as administrator of 668 Secretariat Pty Ltd (administrator appointed) (668), which is the second defendant.

In the second matter, No 2855 of 2014, Sovereign is also the plaintiff. The first defendant is again Mr Vartelas, but in his capacity as administrator of EOS Janus Capital Pty Ltd (administrator appointed) (EJC), and the second defendant is EJC.

The applications seek the same relief in respect of each of the two companies, 668 and EJC, save that the application in relation to EJC seeks a further declaration pursuant to s 600A of the Corporations Act 2001 (Cth) (Corporations Act). The applications are made under ss 1321, 600A (EJC only), 447A and 449B of the Corporations Act for orders relating to the administration of each of 668 and EJC.

On the facts stated in the supporting affidavits Sovereign claims declarations in respect of both applications that:

(a) the proofs of debt submitted by Sovereign on 2 June 2014, in respect of the…

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: [2014] VSC 681
Decision Date: 17 June 2014

CaseChat Overview and Summary

In the case of Re Sovereign MF Ltd (in liquidation), the dispute involved the liquidator's handling of a creditor's proof of debt. The matter was heard in the Supreme Court of New South Wales. The primary issue before the court was whether the liquidator was entitled to admit a proof of debt for a lesser amount than claimed, and whether the liquidator could vote on a resolution despite an objection to the debt. The court had to consider the statutory obligations of the liquidator under the Corporations Regulations 2001 (Cth) and whether the liquidator's actions were in accordance with those obligations.

The court examined the relevant provisions of the Corporations Regulations 2001 (Cth) and determined that the liquidator was required to follow specific procedures when a debt was disputed. Under regulation 5.6.26, the liquidator was obliged to mark the proof of debt as objected to and allow the creditor to vote on resolutions, with the vote being declared invalid if the objection was sustained. The court found that the liquidator was not entitled to exercise the powers under regulation 5.6.23 to make an estimate of the value of the debt, as this was not within the liquidator's statutory powers. The court held that the liquidator's actions in admitting the proof of debt for a lesser amount than claimed, and in voting on resolutions, were improper.

The court set aside resolutions that aimed to remove the liquidator and appointed new administrators nominated by the creditor. The court relied on the decisions in Young v Sherman [2001] NSWSC 1020 and Selim v McGrath [2003] NSWSC 927 to support its findings. The court made orders under section 1321 of the Corporations Act 2001 (Cth) to give effect to its decision, ensuring that the liquidator's actions were in line with the statutory requirements and that the creditors' rights were protected.

Orders