Stout & Scales v Permanent Trustee Australia Ltd
[1999] VSCA 168
•13 August 1999
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted
No. 6327 of 1999
No. 5793 of 1999
| KENNETH JOHN STOUT & ROBERT MICHAEL SCALES (in their capacity as joint administrators of JAVA 452 PTY LTD ACN 083 525 464) and JAVA 452 PTY LTD (Administrators Appointed)ACN 083 525 464 | Applicants |
| v | |
| PERMANENT TRUSTEE AUSTRALIA LTD. (ACN 008 412 913 as Trustee of Advance Property Fund) | Respondent |
APPLICATION ON SUMMONS
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JUDGES: | ORMISTON and PHILLIPS, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 13 August 1999 | |
DATE OF JUDGMENT: | 13 August 1999 | |
MEDIA NEUTRAL CITATION: | [1998] VSCA 168 | |
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Corporations – Administration pending execution of deed of company arrangement – Whether time for execution of deed should be further extended – Power of court to act – Exercise of discretion – Corporations Law Part 5.3A, ss.440C, 444B(2), 447A.
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APPEARANCES: | Counsel | Solicitors |
For the Applicants | Mr. P. Crutchfield | Ernst & Young |
| For the Respondent | Mr. D.H. Denton | Freehill, Hollingdale & Page |
ORMISTON, J.A.:
I will ask Phillips J.A. to deliver the first judgment.
PHILLIPS, J.A.:
The parties before us today are, firstly, the administrators of a company called Java 452 Pty Ltd, which is at present in the course of administration under Part 5.3A of the Corporations Law, and the company ("Java") itself. The administrators were appointed on 6 April 1999. As will be seen, the period of administration is due to end at 4 p.m. today.
The other party is Permanent Trustee Australia Ltd which owns and, until recently at least, was the lessor of certain premises (“the premises”) in Flinders Street occupied by Java and at which Java carried on the business of a coffee shop. The business is in severe financial difficulties.
Because the period of administration ends at 4 p.m. today, this Court has been convened as a matter of urgency to deal with more than one application by the administrators and the company. In what follows I simply refer to the all three applicants as "the administrators".
No doubt because they were prepared in haste the papers are, if I may say so, somewhat less than satisfactory and counsel for Permanent Trustee Australia (which I shall call "the owner") not surprisingly complains of what was in fact short service of the relevant summonses. But by dint of argument this morning the issues that must be resolved without delay have been identified. The parties on both sides have been heard on those issues and in my view a decision can properly be given now.
There are two summonses before us, both dated 11 August 1999 but filed and served only yesterday morning. In support of each there is an affidavit made on 11 August by Rodney Phillip Brown, the solicitor acting for the administrators. Although counsel for the owner handed up this morning two affidavits made hurriedly in answer, only passing reference has yet been made to those affidavits and in what follows I ignore them.
I mention first the summons in Proceeding No. 5793 in which the administrators are seeking an extension of time within which to commence an appeal to the Court of Appeal in respect of the decision of Byrne, J. on 9 July 1999 whereby his Honour dismissed an application by the owner for leave to retake possession of the premises notwithstanding the existence of the period of administration under Part 5.3A of the Corporations Law. That application was made under s.440C. As the application for leave under s.440C was dismissed, the administrators were not dissatisfied with the order made; for thus far they were successful in defeating the owner's application.
However, in the course of his reasons for decision the learned judge held that the lease under which Java was otherwise occupying the premises had been duly terminated on or before 16 April 1999. In terms the proposed notice of appeal which has been supplied to us in conjunction with the summons seeks to appeal against "His Honour's finding that the lease was terminated". I do not pause to consider whether or not such an appeal lies, for, as will be seen, the fate of the present application (to extend the time for appeal) can be otherwise resolved. I only add that his Honour dismissed the owner’s application for leave under s.440C notwithstanding his conclusion that the lease had been terminated, in order that the creditors who were due to meet on 16 July might consider their position before there was any retaking of possession.
At the meeting on 16 July the creditors voted by a majority in favour of a deed of company arrangement under which inter alia the administrators might sell Java’s business as a going concern. Reference was made in the deed to the assignment of the lease of the premises.
On 30 July, and it has not been vouchsafed why the application was not made earlier, the administrators filed a Notice of Motion seeking an order under s.444F of the Corporations Law that the owner be restrained from retaking possession of the premises. Such an order would be necessary to preserve the status quo once a deed of company arrangement was executed; for execution ends the period of administration during which the statutory restraints found in s.440C and s.440D apply.
The Notice of Motion filed on 30 July, which commenced Proceeding No. 6327, was heard by Byrne, J. on 4 August, when the order sought was refused. As disclosed in his Honour's reasons, which were delivered on 6 August, the administrators’ application for an order under s.444F was refused principally because (as his Honour had held on 9 July) the lease of the premises occupied by the company was already at an end; there was therefore nothing to assign even if the deed of company arrangement came into effect. Although it was argued by the administrators that none the less there should be an order under s.444F, his Honour could not see any basis for denying possession to the owner simply to allow occupation to continue if there was no lease.
By the time his Honour gave reasons on 6 August, the period fixed by the Corporations Law for the execution of the deed of company arrangement was about to expire, the resolution of creditors having been passed on 16 July. By virtue of s.444B(2), a deed of company arrangement has to be executed within “21 days after the end of the meeting of creditors” or within "such further period as the Court allows on an application made within those 21 days". The 21 days specified by that sub-section ended on 6 August. However, on that day, and I suppose after delivering his reasons for judgment, his Honour made an order under s.444B(2)(b) extending the time within which the company might execute the deed of company arrangement until 4 p.m. on 13 August. It is that period which ends this afternoon, and hence the second summons which is now before us.
In that second summons, which was filed on 12 August in Proceeding No.6327, the administrators seek a further extension of time under s.444B(2) for the execution of the deed of company arrangement. It is the fact that the deed has still not been executed.
As became apparent from the terms of the summons once it was explained to us in argument this morning, the order for a further extension of time under s.444B(2) is being sought in aid of an appeal which is already on foot. The material in support of this summons includes a notice of appeal which we were told was filed and served yesterday, the administrators thereby having commenced an appeal from the order made by Byrne, J. on 4 August dismissing their application for a restraining order under s.444F. As the notice of appeal discloses, the administrators seek to have the order of dismissal reversed and the relief they sought by their Notice of Motion of 30 July granted. But, as was frankly acknowledged before us, that appeal is of no practical use if, in the meantime, the owner of the premises can retake possession - and hence the application for a further extension of time within which the company might execute the deed of company arrangement. If granted, that would have the effect of extending the period of administration under Part 5.3A which in turn attracts the statutory restraints found in s.440C and s.440D. In terms, the application before us is for a further extension of time under s.444B(2) until at least the hearing and determination of the appeal already on foot.
When asked in the course of argument this morning why the deed could not be executed before 4 p.m. today in any event, leaving the appeal to run its course and, if necessary, an interlocutory injunction granted to preserve the status quo, Mr Crutchfield, who appeared for the administrators, very properly pointed out that he was in no position to give the undertaking usually required as the price of such an injunction - or at all events an undertaking of any value to the owner. Moreover, if the deed is executed today and if the owner is correct in his claim that that there is now no lease because it was terminated some time ago, that in itself, on one view of the terms of the deed, terminates administration under the deed of company arrangement and the company would, by force of the Law, go into voluntary liquidation without further ado. Counsel did not, therefore, propose that the deed should be executed today. Instead, as foreshadowed, he invited the court to make a further order of extension under s.444B(2) in order to preserve the status quo pending appeal.
When it was pointed out from the Bench that a further extension of time under that subsection might not be possible in view of the express statutory requirement that the application for any such extension be "made within those 21 days", counsel relied on two things. First, he said that the period of 21 days was extended by force of the order made on 6 August by Byrne, J. and that by dint of that order “those 21 days” now meant the period ending at 4 p.m. on 13 August. I am not persuaded of that. As at present advised, the Act seems to me too specific to allow of that conclusion. Secondly, counsel relied upon s.447A of the Law and pointed out that the Court of Appeal in New South Wales recently held that that section should be given a very wide interpretation: Australasian Memory Pty Ltd v. Brien (1998) 45 N.S.W.L.R. 111. He invited us, therefore, to act under s.444B notwithstanding the expiry of the 21 days referred to in that section on the ground that we could so act in reliance upon s.447A.
Such a submission goes, of course, to our power to act and says nothing of whether or not we should act in the exercise of the discretion that we would then have.
It is plain to me that the question of power cannot be resolved quickly. Mr Denton has only now heard of the point for the first time and is in no position to argue it; and in saying that I imply no criticism of him. Moreover the possibility of our acting in reliance upon s.447A raises difficult questions which may be of far-reaching import. The position is further complicated by the fact that special leave has already been granted to appeal from the decision of the Court of Appeal in New South Wales and an appeal is now pending in the High Court. Fortunately, I think that we need not resolve the question of power. In what follows I simply assume that we could act under s.444B(2)(b) if so minded and turn to the question whether, if we have the power, we should exercise our discretion in order to extend the time for execution of the deed, as the administrators now seek. The question of the exercise of our discretion must, of course, be determined by reference to the particular circumstances of this case.
First and foremost is the scheme of the Corporations Law in this regard. Plainly the relevant times which are fixed are short; on its face s.444B(2) intends that the deed of company arrangement shall be executed within 21 days, or if that period is extended within such period as is fixed only upon application made promptly, within the initial period of 21 days. In this case it seems that one such application was duly made within that period. I refer to the application which was apparently made on 6 August when his Honour granted an extension under s.444B(2) for seven days. Neither side now seeks to appeal against that extension of time.
Secondly, there is the matter of delay. The owner has maintained all along that the lease was properly determined by 16 April, if not before that. The difficulty that that must pose under the proposed Deed of Company Arrangement must have been apparent to the administrators, at least by the time of the creditors’ meeting on 16 July (when the matter was discussed), if not on 9 July (when Byrne, J. decided the point) or even earlier if, as may have happened, the point became the subject of argument between the parties before they reached Court. Yet though the judge gave his decision on 9 July, nothing more was done about the point until 30 July when the administrators applied for a restraining order under s.444F. A copy of the proposed deed of company arrangement, in which reference was made to assigning the lease, was tabled at the creditors’ meeting on 16 July.
In the course of the reasons for decision given on 6 August, Byrne, J. referred to the period between 16 July and 30 July as reflecting delay which had not been explained – and that is still the case. Moreover, on 4 August (when the application of 30 July was argued) the administrators submitted that a restraining order should be made under s.444F notwithstanding previous termination of the lease. It was not then put to the judge that his earlier decision, that the lease had been determined, was wrong. The administrators saw no need, even on 4 August, to dispute the earlier finding. They say in the affidavit filed on their behalf in Proceeding No.5397 that that was because they did not see the continuation of the lease as a pre-requisite to an order under s.444F. That may well have been wrong, but as a result the administrators did not argue that the lease was still on foot when they put their submissions on 4 August and did not suggest then that they wished to appeal against the “finding” of 9 July. That did not emerge until the summonses which are now before us were served on 12 August with a copy of the proposed notice of appeal in Proceeding No.5793.
During argument this morning, it became perfectly clear that the administrators are now only too keen to argue to the Court of Appeal that Byrne, J. was wrong in deciding, on 9 July, that the lease between the owner and Java was no longer on foot. True it is, the administrators wish to argue also that, even if Byrne, J. was correct in so deciding, a restraining order should none the less have been made under s.444F, but, as at present advised (and we certainly have not heard any detailed argument) I should have thought that the case for an order under s.444F was very much weaker if there was no lease on foot (and counsel was disposed, I think, to agree with this assessment). However that may be, the administrators now seek to argue that Byrne, J. was wrong on 9 July - and to argue that point either by means of the appeal they propose to commence in Proceeding No.5793 (if the time for appeal is extended) or by means of the appeal already commenced in Proceeding No.6327, provided only that the status quo can be preserved in the meantime by an order under s.444B(2)(b).
The owner submitted this morning that, given the specific statutory time constraints attending the execution of a deed of company arrangement according to the Corporations Law, it is simply too late to permit the termination of the lease now to be raised in argument before the Court of Appeal. It may be, and I do not decide it, that if the administrators did not require an exercise of discretion in their favour in aid of the appeal which, according to what we were told, has been instituted in Proceeding No.6327, delay in raising the point about termination of the lease would be of less significance – or, if not of less significance, then of different significance. But the administrators do come before us seeking an exercise of discretion under s.444B(2)(b) to maintain the status quo until such time as an appeal is heard and determined and if, as I am assuming, we have the power to grant their application, then, notwithstanding the submissions that were made to us this morning, I find myself not persuaded that that discretion should be exercised in their favour – at this eleventh hour, as it were.
Quite independently of the foregoing, Mr. Denton contended that we should not exercise our discretion under s.444B(2)(b) otherwise than in conjunction with comprehensive and valuable undertakings as to damages and, as already indicated, none such was offered. Mr Crutchfield answered, first, by pointing out that under the Corporations Law rent would have to continue being paid for occupation of the premises, if occupation continued; and, secondly, by submitting that in view of the statutory scheme it was not appropriate to exact undertakings as to damages if a restraining order was simply being sought under s.444F. If I may say so, I am not yet clear about the second proposition, and even if rent must be paid under the Corporations Law so long as occupation continues (as to which I say nothing), that may not provide a complete answer to the argument of prejudice raised by Mr Denton in this instance. But I say no more about the need or the sufficiency of any undertaking as to damages, for in my opinion the application for a further extension of time under s.444B(2)(b) should be refused in any event, in the exercise of discretion.
In the result it seems to me, subject to anything counsel might say, that the application made in Proceeding No. 6327 should be refused. I have dealt with paragraph 1 of the summons which seeks the extension of time under s.444B(2)(b). The application in paragraph 2 is for leave to appeal against Byrne, J.'s refusing on 4 August to grant the administrators an adjournment for the filing of further material and after discussion this morning that application was not pressed separately. As for paragraph 3, there is no need now to consider whether or not there should be some order made in respect of the service of the summons by which the application was instituted. The application made in Proceeding No. 6327 of 1999 can be simply dismissed.
Returning now to the summons filed in Proceeding No. 5793 of 1999, that seeks an extension of time within which to commence an appeal against “the finding” made by Byrne, J. on 9 July 1999 “that the lease was terminated”, as it is described in the proposed notice of appeal. I say no more about the merits or otherwise of such an appeal. It may be that if the appeal on foot in Proceeding No. 6327 was still to be pursued, this application for an extension of time within which to commence an associated appeal might be simply adjourned over to be heard, if and when the need ever arose, in conjunction with the hearing of the appeal already on foot. But as the appeal which is proposed in Proceeding No. 5793 is, as I apprehend it, only in aid of the other appeal, the refusal of a further extension of time under s.444B(2)(b) which is fatal to the one must be equally destructive of the other, so that the summons in Proceeding No. 5793 can also be dismissed. Certainly on the arguments that were put I am far from persuaded that the justice of the case requires the extension of time which is sought in the summons.
For those reasons – and unless counsel has any submission otherwise - I would dismiss the application brought by summons in Proceeding No. 6327 and dismiss also the application brought by summons in Proceeding No. 5793.
ORMISTON, J.A.:
I agree.
The order of the court in each case, that is in Proceeding No. 5793 and in Proceeding No. 6327, is that the application be dismissed with costs.
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