Total Health Screening Pty Ltd v Elenor Howard and 4 Ors

[2004] NSWSC 1270

CITATION:	Total Health Screening Pty Ltd & Anor v Elenor Howard & 4 Ors [2004] NSWSC 1270
HEARING DATE(S):	22 December 2004 24 December 2004 30 December 2004 31 December 2004
JUDGMENT DATE:	31 December 2004
JUDGMENT OF:	Simpson J
DECISION:	(i) the licence agreement dated 29 November 2004 between Total Health Screening Pty Limited, Elenor Howard, William James Hamilton, Pino Fiorentino and Timothy Kinsela was validly terminated no later than 30 December 2004; (ii) plaintiffs entitled to possession of the premises at level 1, 183-193 Oxford St, Bondi Junction, NSW 2002 and to the assets identified in schedule A to the summons ; (iii) defendants forthwith to deliver up possession of the property and the assets to the second plaintiff ; (iv) grant leave to the plaintiffs to issue a writ of possession against the defendants in respect of the property and the assets ; (v) defendants to pay the plaintiff's cost of the proceedings.
CATCHWORDS:	licence agreement - property and assets - summons - appointment of administrator to first plaintiff - conditions precendent of Deed - appointment of proxy by creditor company
LEGISLATION CITED:	Corporations Act 2001s447A
PARTIES :	Total Health Screening Pty Limited - 1st Plaintiff Natric Pty Limited - 2nd Plaintiff Elenor Howard - 1st Defendant Timothy Kinsela - 2nd Defendant Thea Collimore - 3rd Defendant John Rathbone - 4th Defendant Timothy Kinsella - 2nd Defendant
FILE NUMBER(S):	SC 014262/04
COUNSEL:	A Fernon - 1st & 2nd Plaintiffs
SOLICITORS:	Baker and McKenzie - 1st & 2nd Plaintiffs D Saad - 1st &2nd Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

SIMPSON J

Friday 31 December 2004

04/014262 TOTAL HEALTH SCREENING PTY LIMITED & Anor v Elenor HOWARD & 4 Ors

JUDGMENT

1 Her Honour: It is now 4.20pm on 31 December 2004. These proceedings have been limping along in one form or another since 22 December. I am in a position to deliver judgment but it may be my reasons will not be as complete as I would otherwise prefer.

2 The proceedings were commenced by summons filed on 22 December in which the plaintiffs, the Total Health Screening Pty Limited (Administrators Appointed) and Natric Pty Limited seek the following orders of substance:

(a) a declaration that the licence agreement dated 29 November 2004 between Total Health Screening Pty Limited, Elenor Howard, William James Hamilton, Pino Fiorentino and Timothy Kinsela was validly terminated on 20 December 2004;

(b) a declaration that the defendants are trespassers on the land known as level one, 183-193 Oxford St, Bondi Junction, NSW 2022 (the “Property”) and of the assets identified in schedule A to the summons;

(c) a declaration that the plaintiffs are entitled to possession of the Property and the Second Plaintiff is entitled to possession of the Assets;

(d) an order that the defendants forthwith deliver up possession of the Property to the Plaintiffs and the Assets to the Second Plaintiff;

(e) leave to issue a writ of possession against the defendants in respect of the Property and the Assets.

3 On 22 December I abridged the time for service and stood the matter over for hearing on 24 December.

4 On 24 December the first and second defendants, Ms Elenor Howard and Mr Timothy Kinsela, appeared unrepresented and sought adjournment of the proceedings. Initially I declined to adjourn the proceedings but it became apparent Ms Howard was in some distress by reason of a medical condition and it became necessary to grant the adjournment.

5 I then adjourned the proceedings to the first business day after the Christmas break being 30 December. On that day Ms Howard and Mr Kinsela were represented by senior counsel who again sought adjournment and I granted that adjournment until today, 31 December.

6 At the commencement of proceedings today I was advised that the parties were in discussions. Those discussions ultimately did not resolve the matter and senior counsel who appeared for the first and second defendants withdrew from the proceedings.

7 I mention these matters to explain why it is that the proceedings have ultimately been heard under some considerable pressure of time. Ms Howard and Mr Kinsela have been represented since about 12.40 pm by Mr Saad, solicitor.

8 Mr Saad sought also to file in court a notice of motion seeking various orders under s447A of the Corporations Act 2001. I declined to deal with the notice of motion today and stood it over to the vacation judge on 4 January 2005, although whether it will be heard on that day is of course a matter for that judge.

9 I am conscious that the issues sought to be raised in the notice of motion may have some bearing upon the issues raised in the summons but it was neither practical nor appropriate nor fair to deal with the notice of motion in any other way. Besides that it has been suggested the orders sought ought properly be the subject of an originating process, a submission as to which I make no finding.

10 Put shortly, the proceedings arise out of the management and operation of a radiology and/or radiography business conducted at the premises known as the Property at Bondi Junction. It was a business conducted by the first plaintiff. Administrators were appointed to the first plaintiff on 29 November 2004. On the same day Total Health Screening entered into a licence agreement with Ms Howard. Also parties to the agreement were the Administrators of Total Health Screening, William James Hamilton, Pino Fiorentino and Mr Kinsela. The substance of the licence agreement is to be found in clause 4 in which, again put shortly, Total Health Screening (to which I will refer as “THS”) effectively transferred occupation of the premises and the operation of the business to Ms Howard by licence. Clause 4(g) of the agreement provided that the period of the licence would terminate when either:

1. the purchaser completes its purchase of the Assets or;
2. the purchaser breaches the Deed, becomes insolvent or is placed into control, liquidation or administration or;
3. the Deed is terminated due to failure to satisfy the conditions precedent.

11 Clause 4(h) provided that in the event of termination of the Deed due to failure to satisfy the conditions precedent the purchaser would immediately deliver to the administrators all of the assets of the company’s business and books of records of the company’s business. The purchaser of course is defined in the Deed as Ms Howard.

12 Clause 3A under the heading “conditions precedent” provided that:

(a) completion of this Deed is conditional on satisfaction of the conditions precedent by the specified time for satisfaction thereof;
(b) in the event that the conditions precedent are not satisfied then either the administrators or the purchaser may terminate the Deed by serving written notice on the other whereupon the licence agreement referred to in clause 4 hereof shall automatically terminate.

13 The conditions precedent were defined in the interpretation clause, clause 1, in the following way:

“Conditions precedent: Means the following conditions which must be satisfied to the administrator’s satisfaction within 28 days of the date of this deed or such other period as the administrators and the purchaser may agree to in writing; paragraph (a) the consent in writing of the bank [Westpac Bank] to the terms of this deed and agreement by the bank to discharge the debenture charge and the bill of sale with respect to the assets at completion.
(b) the consent in writing of the bank to a sale by the company of the assets for the purchase prices specified in clauses 5 and 6 hereof.
(c) the approval of the terms of this deed by a committee of creditors of the company or alternatively by the company’s creditors in meeting or by the court.”

14 Ms Howard entered into possession of the property and the business and operated the business. On 20 December at 10am a creditors meeting took place. The meeting was chaired by the administrator, Mr William James Hamilton. At the meeting a resolution was put by the Chairman proposing that a deed of company arrangement in the terms of a proposal by Natric Pty Limited be executed by the company. A motion was put to adjourn the meeting for half an hour but this motion failed, and the motion proposed by the Chairman was put to the vote and was carried by a substantial majority.

15 The effect of the successful resolution was that the approval of the terms of the Deed in favour of Ms Howard was not and would not be approved by a meeting of the company’s creditors and could not be approved by a committee of creditors of the company. The inevitable effect of this is that at least one of the conditions precedent could not be met as at the date of the meeting. I note that by the time of the meeting twenty eight days had not elapsed and there still remained the theoretical possibility at that time that the licence agreement could be approved by a subsequent meeting. However, the twenty eight days have since elapsed and there is no evidence, and indeed the evidence is all to the contrary, of an approval of what I will call the Howard licence agreement. Further, the second condition precedent is the consent in writing of the Westpac Bank to a sale by the company with the assets, the purchase prices specified in clauses 5 and 6. There is no evidence of such consent and there is evidence to the contrary, that is the bank will not give its consent. Similarly the first condition precedent envisages the consent in writing of the Westpac Bank to the terms of the deed and that also is not forthcoming.

16 Clause 3A as I have indicated specifies that completion under the Deed is conditional on satisfaction of the conditions precedent by the specified time. That time was either 27 or 28 December. Clause 3A(b) provides that in the event the conditions precedent are not satisfied then either party may terminate the Deed by serving written notice upon the other whereupon the licence agreement is automatically to terminate.

17 On 20 December Ms Angela Wozniak, a receptionist employed by the Administrators, served upon Mr Kinsela, Ms Howard and others written notices of termination of the licence agreement. It is this written notice that is the subject of the first substantive order sought in the summons. I have doubts as to whether that purported termination was valid since the twenty eight days allowed had not expired. However, that defect, if it is a defect, has been remedied.

18 On 30 December, Mr James Hamilton, a solicitor, handed second notices of termination to Ms Howard and to Mr Kinsela. I am of the view that these notices do undoubtedly comply with what is required by clause 3A(b). Further, it is perfectly plain the conditions precedent have not been satisfied. The claim by the plaintiffs was defended on behalf of the defendants on a number of bases including that there was a degree of mala fides and impropriety in the conduct of the creditors meeting. For example, by affidavit Ms Howard deposed that she had sought to represent a number of creditors by proxy and that these were declined by the administrator chairman. In her affidavit she did not identify the persons whom she claim had entrust her with their proxies but she alleged she had been seeking the recovery of the proxy documents and had been unsuccessful in doing this.

19 The minutes of the meeting refer to the tabling of documents and record that Ms Howard tabled a schedule entitled “proxies alleged: Elenor Howard” claiming the proxies had been hand delivered to Hamilton’s offices by her son the previous week. The minutes record that the list was not admitted and in the absence of proxies did not enable Ms Howard to vote on behalf of the creditors named.

20 I am not in any position to make a judgment about the propriety of the ruling of the Chairman in relation to the proxies and the evidence is insufficient for me to find that this constituted any impropriety on the part of the Chairman or any other party. It was also suggested that there was evidence showing there were interlocking relationships between various companies all under the control of Mr Jacov Vaisman who swore affidavits on behalf of the plaintiff companies and who I think it can be fairly said is the moving force behind the present application. Again the evidence is insufficient for me to conclude that there is anything improper in those interlocking relationships. It was submitted the licence agreement had been sabotaged. Inter alia it was submitted some of the debts the subject of the creditors meeting had been inflated. This evidence was given by Mr Kinsela in affidavit form and it was suggested that there was some impropriety to the extent of a fraud upon other creditors in these claims. As with the other assertions the evidence is insufficient for me to make such a finding.

21 Mr Saad submitted that I should find that the first plaintiff was estopped from avoiding its obligations under the deed but I make the same finding and comment in relation to that.

22 I should mention one particular complaint made on behalf of the defendants. This concerned the appointment of a proxy by a creditor company, Alliance Finance Corporation. This was because the proxy form shows the Chairman, Mr Hamilton, was appointed as proxy and directed to vote in the exercise of his discretion. However, there then followed a series of boxes containing provision for directions to be given in relation to agenda items that were known, including the proposal to execute a deed of arrangement in favour of Natric. Against each of these were boxes under the heading “for” and “against”. Against the motion concerning Natric’s proposal a diagonal line has been drawn against the word “against”. It was suggested this should be taken as a direction that the proxy be exercised to vote against that resolution and that the minutes of the meeting showed that the vote of Alliance Finance Corporation was in fact cast in favour of that resolution. The lines on the proxy form are not unequivocally a direction to vote against the proposal nor are they unequivocally a direction to vote in favour of the proposal. The suggestion that they were intended to be a direction to vote against the proposal is in conflict with what appears above where the Chairman’s discretion is invoked. I cannot possibly draw any adverse inferences from that evidence. The proxy form is not as clear as it might be but the reference to the Chairman’s discretion is the clearest part of it. I refer to the definition clause in which one of the conditions precedent is the approval of the terms of the Deed either by a committee of creditors or by a creditors’ meeting or by the court. In final submissions Mr Saad sought approval by the court of that Deed. I declined to entertain that application, it being inappropriate for the nature of the proceedings and not the subject of notice and indeed not the subject of appropriate evidence although there was some evidence as to the benefits to the company of the resolution proposed by Natric. I also note that Mr Saad sought that the court make orders under s447A of the Corporations Act, but again it was inappropriate in the absence of proceedings being properly instituted to embark upon such a matter.

23 The result is that the plaintiffs have established their entitlement to orders substantially of the kind sought.

24 I make the following orders and declarations:

(i) A declaration that the licence agreement dated 29 November 2004 between Total Health Screening Pty Limited, Elenor Howard, William James Hamilton, Pino Fiorentino and Timothy Kinsela was validly terminated no later than 30 December 2004.

(ii) I declare that the plaintiffs are entitled to possession of the premises at level 1, 183-193 Oxford St, Bondi Junction, NSW 2002 and to the assets identified in schedule A to the summons.

(iii) I order that the defendants forthwith deliver up possession of the property and the assets to the second plaintiff.

(iv) I grant leave to the plaintiffs to issue a writ of possession against the defendants in respect of the property and the assets.

(v) I order the defendants to pay the plaintiff’s cost of the proceedings.

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Last Modified: 07/16/2007