Rewards Projects Ltd (Administrators Appointed) v The Ark Fund Ltd - [2010] WASC 125

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: REWARDS PROJECTS LTD (ADMINISTRATORS APPOINTED) -v- THE ARK FUND LTD [2010] WASC 125

CORAM: MASTER SANDERSON

HEARD: 21 MAY 2010

DELIVERED : 21 MAY 2010

PUBLISHED : 2 JUNE 2010

FILE NO/S: COR 76 of 2010

BETWEEN: REWARDS PROJECTS LTD (ADMINISTRATORS APPOINTED)
First Plaintiff
REWARDS GROUP LTD (ADMINISTRATORS APPOINTED) (RECEIVERS & MANAGERS APPOINTED)
Second Plaintiff
REWARDS LAND PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS & MANAGERS APPOINTED)
Third Plaintiff
REWARDS MANAGEMENT PTY LTD (ADMINISTRATORS APPOINTED)
Fourth Plaintiff
ORD PACKERS PTY LTD (ADMINISTRATORS APPOINTED)
Fifth Plaintiff
BERRY PACKERS PTY LTD (ADMINISTRATORS APPOINTED)
Sixth Plaintiff
MARTIN BRUCE JONES
Seventh Plaintiff
ANDREW JOHN SAKER
Eighth Plaintiff
DARREN GORDON WEAVER
Ninth Plaintiff
AND
THE ARK FUND LTD
First Defendant
LANCINO CANDACE NOMINEES PTY LTD as trustee for THE S L DOBSON FAMILY TRUST, THE CRAIG DOBSON FAMILY TRUST and THE LACHLAN DOBSON FAMILY TRUST
Second Defendant
PEMBERTON ESTATES JV PTY LTD
Third Defendant
SALVATORE PINNA
Fourth Defendant
ROCCO PIGNATARO
Fifth Defendant
BRAND PTY LTD
Sixth Defendant
MICHAEL JAMES LOCKART
Seventh Defendant
NORMA KATE CUMMING
PATRICK LEO WADE
JOANNA KATE WADE
Eighth Defendants
TUNBRIDGE PROPERTIES LTD
Ninth Defendant
DIELRO PTY LTD
ROSE MARGARET MARINKO
Tenth Defendants
PEMBERTON PREMIUM VINEYARDS LAND PTY LTD
Eleventh Defendant
DAVID WAYNE RADOMILJAC
MONICA ANNE RADOMILJAC
Twelfth Defendants
NOONGAR PROPERTY HOLDINGS PTY LTD as trustee for THE NOONGAR PROPERTY TRUST
Thirteenth Defendant
NATIONAL AUSTRALIA BANK LTD
Fourteenth Defendant
ORIX AUSTRALIA CORPORATION LTD
Fifteenth Defendant
MACQUARIE EQUIPMENT RENTALS PTY LTD
Sixteenth Defendant
BMW AUSTRALIA FINANCE LTD
Seventeenth Defendant
EXPERT 1 PTY LTD
Eighteenth Defendant
COMMONWEALTH BANK OF AUSTRALIA LTD
Nineteenth Defendant
TELSTRA CORPORATION LTD
Twentieth Defendant
WESTWAY NOMINEES PTY LTD
Twenty-first Defendant
EXONET AUSTRALIA PTY LTD
Twenty-second Defendant
HEWLETT-PACKARD AUSTRALIA PTY LTD
Twenty-third Defendant
ESANDA FINANCE CORPORATION LTD
Twenty-fourth Defendant
BANK OF QUEENSLAND LTD
Twenty-fifth Defendant

Catchwords:

Corporations Law - Application by administrator for an extension of time to give notice to lessors - Turns on own facts

Legislation:

Nil

Result:

Extension of time granted

Category: B

Representation:

Counsel:

First Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Second Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Third Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Fourth Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Sixth Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Seventh Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Eighth Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
Ninth Plaintiff     :     Mr P D Crutchfields SC & Ms E C Hensler
First Defendant     :     Mr J R Atkinson
Second Defendant     :     No appearance
Third Defendant     :     No appearance
Fourth Defendant     :     No appearance
Fifth Defendant     :     No appearance
Sixth Defendant     :     No appearance
Seventh Defendant     :     No appearance
Eighth Defendants     :     No appearance
Ninth Defendant     :     No appearance
Tenth Defendants     :     No appearance
Eleventh Defendant     :     No appearance
Twelfth Defendants     :     No…

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: [2010] WASC 125
Decision Date: 2 JUNE 2010

CaseChat Overview and Summary

Rewards Projects Ltd (Administrators Appointed) v The Ark Fund Ltd is a case before the Supreme Court of New South Wales, where the administrators of Rewards Projects Ltd sought an extension of time to give notice to lessors. The dispute centres around whether the administrators should be granted a short extension under s 443B(8) of the Corporations Act 2001 (Cth) to provide notice to lessors of their intention to review leases and whether this would prejudice the lessors. The legal issues the court had to decide included whether the administrators were entitled to an extension of time to give notice to lessors and if granting such an extension would prejudice the lessors. The court examined s 443B(2) of the Act, which states that a court may not make an order under s 443B(8) if it is satisfied that the making of the order would be unjust to the lessor. The court also considered s 447A of the Act, which confers on the court a power to make orders, as it thinks appropriate, about how pt 5.3A of the Act should operate in relation to a particular company.

The court found that s 443B(2) of the Act did not apply if a court makes an order excusing the administrators from liability under s 443B(8), as seen in the case of Nardell Coal Corporation (in liq) v Hunter Valley Coal Processing Pty Ltd. The court also noted that s 447A of the Act conferred on it a power to make orders, as it thought appropriate, about how pt 5.3A of the Act should operate in relation to a particular company. The court considered the objects of pt 5.3A of the Act, which essentially provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chance of the company, or as much as possible of its business, continuing in existence, or if it is not possible for the company or its business to continue in existence, results in a better return for the company's creditors and members than would result from an immediate winding up of the company. The administrators argued that if they were to give notice under s 443B(3) of the Act, a lessor may seek to treat that notice as notice of repudiation of the lease, which would prejudice their ability to achieve the objects of pt 5.3A of the Act. The court considered the interests of all creditors, not just members of the schemes, and determined that a short extension would not significantly prejudice the interests of the landlords and the lessors.

The court's decision was that a short extension would not significantly prejudice the interests of the landlords and the lessors. The thirteenth defendant argued that they would be significantly prejudiced by the granting of the extension, as the liability of the Rewards Companies to them would increase by $34,000 to $113,000, potentially eroding their security. However, the court found that the administrators' position that a short extension would not significantly prejudice the interests of the landlords and the lessors was acceptable. Therefore, the court granted the administrators an extension of time to give notice to lessors. This decision ensures that the administrators can complete their assessment of the Rewards Companies' business, property and affairs and obtain funding, while also considering the interests of all creditors and achieving the objects of pt 5.3A of the Act.

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

It is clear that s 443B(2) of the Act does not apply if a court makes an order excusing the administrators from liability under s 443B(8): see Nardell Coal Corporation (in liq) v Hunter Valley Coal Processing Pty Ltd [2003] NSWSC 642 (this case concerned similar provisions in relation to controllers set out in s 419A of the Act). Section 443B(8) is in its terms unconfined. Section 447A of the Act confers on the court a power to make orders, as it thinks appropriate, about how pt 5.3A of the Act should operate in relation to a particular company. The power conferred by s 447A includes the power to alter times fixed by a provision of pt 5.3A: see Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. Section 435A of the Act sets out the objects of pt 5.3A. Essentially this part of the Act provides for the business, property and affairs of an insolvent company to be administered in a way that:1.maximises the chance of the company, or as much as possible of its business, continuing in existence; or 2.if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company. As the administrators are administrators of a responsible entity of managed investment schemes they submitted, and I accept, they must consider the interests of all creditors not just members of the schemes. The administrators maintain that if they were to give notice under s 443B(3) of the Act a lessor may seek to treat that notice as notice of repudiation of the lease. If this step were taken it would prejudice the administrators' ability to achieve the objects of pt 5.3A of the Act. The administrators also maintained, and again I accept, that deciding to give notice under s 443B(3) of the Act or not to give notice before completing their assessment of the Rewards Companies' business property and affairs may prejudice their ability to obtain funding and to achieve the objects of pt 5.3A of the Act. It was the administrators position that a short extension would not significantly prejudice the interests of the landlords and the lessors. The thirteenth defendant did not accept that was so. They maintained they would be significantly prejudiced. The thirteenth defendant's position was set out in a letter sent by accountants Deloitte Touche Tohmatsu to the administrators on 20 May 2010. This letter appears as annexure KG3 to an affidavit of Kieran Chu Foo Kuok sworn 21 May 2010 and filed in support of the application. The accountants note that both the lease for the Colin Street premises and the licence for the car park are in standard terms. They point out the thirteenth defendant holds a bank guarantee in an amount of $112,840.03. As at 15 May 2010 the liability of the Rewards Companies to the thirteenth defendant stood at $79,187.67. If the extension were granted the liability of the Rewards Companies to the thirteenth defendant would increase by $34,000 to $113,000. The concern of the thirteenth defendant was that the security would eroded so that at the end of any extended period the liability of the Rewards Companies to the thirteenth defendant would cover the full amount of the bank guarantee without taking into account any costs and expenses.