Spacorp Australia Pty Ltd v Fitzgerald
[2001] VSC 61
•1 March 2001
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 4576 of 2001
| SPACORP AUSTRALIA PTY. LTD. (ADMINISTRATOR APPOINTED) AND ANOTHER | Plaintiffs |
| v. | |
| LAURENCE FITZGERALD AND OTHERS | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 27 FEBRUARY 2001 | |
DATE OF JUDGMENT: | 1 MARCH 2001 | |
CASE MAY BE CITED AS: | SPACORP AUSTRALIA PTY. LTD. & ANOR. v. FITZGERALD & ORS. | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 61 | |
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CATCHWORDS: Corporations Law – Appointment of Administrator – Appointment an abuse of process – Administration terminated – The Corporations Law, s.447A.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr. M. Dreyfus QC and Mr. J. Nolan | Lewenberg & Lewenberg |
| For the First and Second Defendants | Mrs. C. Kenny | Mills Oakley |
HIS HONOUR:
The plaintiff, Spacorp Australia Pty Ltd, is engaged in the business of marketing and providing beauty products and services.
The third defendant, Myer Stores Limited, operates major departmental stores throughout Australia.
In June 1998 Spacorp, a company associated with it named Aroma Science Pty Ltd, and Myer, entered into an agreement whereby Spacorp was to establish facilities to retail certain products and services in nominated Myer stores. It was a term of the agreement that Myer provide funding to Spacorp for the purpose of establishing its business in the stores.
Pursuant to the agreement Myer paid $1.2 million and certain other moneys to Spacorp to enable it to establish and conduct the business.
Spacorp's business was not a success and in July 2000 the agreement expired and its operations at Myer ceased.
A dispute then arose between Spacorp and Myer concerning repayment of the moneys Myer had advanced to Spacorp.
On 26 July 2000 Myer served a statutory demand on Spacorp pursuant to s.459E of the Corporations Law claiming the sum of $2,553,511.17.
On 20 August 2000 Spacorp applied to the court to set aside the statutory demand on the ground that there was a valid dispute between the parties as to the existence of the debt.
On 12 October 2000 the Senior Master set aside the statutory demand.
On 19 October 2000 Myer appealed to a judge of the court against the orders of the Senior Master.
On 9 November 2000 Warren, J. upheld Myer's appeal, set aside the orders of the Senior Master, and dismissed Spacorp's application to set aside the statutory notice.
On 14 November 2000 Spacorp appealed from the decision of Warren, J. To the Court of Appeal.
On 16 November 2000 Warren, J. Extended the time for compliance with the statutory demand to 1 December 2000.
On 1 December 2000 the Court of Appeal stayed the time for compliance with the statutory demand until 21 days after the hearing and determination of Spacorp's appeal or further order. That order was not opposed by Myer. The Court of Appeal also ordered that Spacorp provide security for the costs of the appeal in the sum of $12,000. Spacorp provided that security on 15 December 2000.
On 6 February 2001 Myer made a demand on Spacorp pursuant to the terms of the agreement of June 1998 for payment of the said sum of $2,553,511.17.
On 7 February 2001 Myer appointed the first and second defendants administrators of Spacorp.
On 22 February 2001 Spacorp and Aroma filed an originating motion in the court seeking an order declaring the appointment of the first and second defendants as administrators of Spacorp invalid; alternatively an order staying the administration of Spacorp until 21 days after the hearing and determination of Spacorp's appeal to the Court of Appeal, or further order.
It is argued on behalf of the plaintiffs that to appoint administrators of Spacorp whilst an appeal is pending to the Court of Appeal in respect of the very debt which is relied upon as the basis for the appointment is an abuse of process and an abuse of Part 5.3A of the Corporations Law; all the more so when the Court of Appeal has stayed the time for compliance with the statutory demand served on Spacorp in relation to the debt until 21 days after the hearing and determination of the appeal or further order.
It is argued that the clear intention of Myer is to proceed to a winding up of Spacorp, thereby putting an end to Spacorp's appeal to the Court of Appeal and leaving unresolved the question of the disputed debt. That that is so, it is said, is clear from the recommendation of the first defendant which is to be put to the second meeting of creditors of Spacorp to be held on 5 March 2001, namely, that Spacorp be wound up (see Exhibit LAF2 to the affidavit of Laurence Andrew Fitzgerald, sworn 27 February 2001).
The principal arguments advanced on behalf of the defendants are that the appointment of the administrators is a valid appointment and cannot be impeached on such a ground and that once the appointment is made the court has no power to make an order staying the administration.
Whilst I agree that on its face there is nothing invalid about the appointment of the first and second defendants as administrators of Spacorp, to my mind that is not necessarily an answer to the plaintiffs' case.
In the circumstances, I find it unnecessary to determine whether the court has power to stay an administration and do not do so.
Section 447A of the Corporations Law gives the court very wide powers in relation to the administration of a company.
The relevant subsections read:
"447A General power to make orders
(1)The Court may make such order as it thinks appropriate about how this Part is to operate in relation to the particular company.
(2)For example, if the Court is satisfied that the administration of a company should end:
(a) because the company is solvent; or
(b) because provisions of this Part are being abused, or
(c)for some other reason; the Court may order under subsection (1) that the administration is to end.
(3) An order may be made subject to conditions."
This aspect of the law was considered by the High Court in Australasian Memory Pty Ltd and Another. v. Brien and Another (2000) 34 ACSR 250.
At p.255 the court said:
"It is important to notice that the orders that may be made under s447A(1) are described as orders about how Pt 5.3A is to operate 'in relation to a particular company'. The power is not cast in terms of a power to make orders to cure defects or to remedy the consequences of some departure from the scheme set out in the other provisions of Pt 5.3A. Its operation is not confined to such cases. Nor is there anything on the face of s447A(1) that suggests that it should be read down. In particular, the words of the provision are wide enough to confer power to make orders which will have effect in the future but which are occasioned by something that has been done (or not done) under the other provisions of Pt 5.3A before application is made under s447A(1). As was said in the judgment of the court in Owners of 'Shin Kobe Maru' v. Empire Shipping Co Inc (1994) 181 CLR 404 at 421:
'It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.'
Cogent reasons must be advanced, then, if the power given by the general words of s447A(1) is to be read down.
[18] Section 447A(1) speaks of orders about how 'this Part' is to operate. The reference to 'this Part' cannot be read as referring only to the part as a whole. That is, it cannot be read as referring, in some global way, to the total operation or effect of the part. In its context, the reference to 'this Part' is to be understood as a reference to each of the provisions in it, for it is the provisions of the part which give it the operation which an order under s447A(1) may affect. And although the examples given in s447A(2) cannot be taken as exhaustive of the scope, or as controlling the meaning, of s447A(1), it is clear from those examples that they assume that the orders under s447A(1) may alter the operation of other provisions of the part. That is, the orders contemplated in the examples go beyond a curial determination of what is the effect of existing provisions of the part on a particular company in the circumstances that may be established in a proceeding; the orders contemplated are orders that alter how the part is to operate in relation to a particular company, not how the part does operate in relation to that company."
In my opinion, the action of Myer in appointing administrators of Spacorp at the time it did can properly be categorized as an abuse of process.
Having chosen to serve a statutory notice on Spacorp with a view to having it wound up and been thwarted in the way it has, I think that it was totally inappropriate for Myer to seek then to attain its objective by appointing administrators. All the more so when it was well aware of the fact that the appeal was on foot and that the Court of Appeal had stayed the time for compliance with the statutory notice until after the hearing and determination of the appeal.
Spacorp has thus far pursued its appeal with diligence and has undertaken to the court that if the appeal is successful it will forthwith file an appropriate proceeding in the court with a view to resolving the question of its indebtedness (if any) to Myer. In my opinion it should be given that opportunity.
It was argued further on behalf of the defendants that the delay which has occurred between the appointment of the administrators and the filing of this application is such as to preclude Spacorp from obtaining the relief it now seeks. I reject that contention. I do not consider that it can be said that there has been undue delay on Spacorp's part. As soon as the appointment of the administrators was made Spacorp's solicitors signalled their intention to challenge the appointment.
Pursuant to the provisions of s.447A of the Corporations Law I order that the administration of Spacorp Australia Pty Ltd end forthwith.
Because I consider that the appointment of the administrators was an abuse of process, I order that the third defendant pay the plaintiffs' costs of this proceeding on a solicitor own client basis.
I make no order in respect of the second and third named defendants' costs of the proceeding having regard to the fact that they supported Myer's opposition to the plaintiffs' application.
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