Welcome Hotel Pty Ltd v Rick Manietta Investments Pty Ltd
[2011] NSWSC 1574
•13 December 2011
Supreme Court
New South Wales
Medium Neutral Citation: Welcome Hotel Pty Ltd v Rick Manietta Investments Pty Ltd [2011] NSWSC 1574 Hearing dates: 13 December 2011 Decision date: 13 December 2011 Jurisdiction: Equity Division Before: Gzell J Decision: Originating process dismissed with costs.
Catchwords: CORPORATIONS - Management and Administration - application that administration should end - creditor sued company in debt - debt disputed - administrator appointed - whether abuse in terms of the Corporations Act 2001 (Cth), s 447A(2)(b) Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Aloridge Pty Ltd (prov liq apptd) v Christianos (1994) 13 ACSR 99
Argyle Art Centre Pty Ltd v Argyle Bonds & Free Stores Co Pty Ltd [1976] 1 NSWLR 377
Spacorp Australia Pty Ltd (Administrator apptd) v Fitzgerald & Ors [2001] VSC 61; (2001) 19 ACLC 979Category: Procedural and other rulings Parties: Welcome Hotel Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (First Plaintiff)
Tinsar Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed (Second Plaintiff)
Damian James Silk (Third Plaintiff)
Rick Manietta Investments Pty Ltd (First Defendant)
Andrew Spring (Second Defendant)
Trajan John Kukulovski (Third Defendant)Representation: Counsel
A Cheshire/N Kulkarni (Plaintiffs)
B Coles QC/J Baird (First Defendant)
Solicitors
McLachlan Thorpe Partners (Plaintiffs)
ERA Legal (Second and Third Defendants)
File Number(s): 2011/395257
EX TEMPORE Judgment
Before the Court is an originating process seeking the termination of an administration.
The Corporations Act 2001 (Cth), s 447A(1) provides that the court may make such order as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. Section 447A(2) provides, as examples, that if the court is satisfied that the administration of the company should end because the company is solvent, or because provisions of Part 5.3A are being abused, or for some other reason, the Court may order under s 447A(1) that the administration is to end.
In support of the application reference was made to Aloridge Pty Ltd (prov liq apptd) v Christianos (1994) 13 ACSR 99. In that case Mr Christianos obtained the appointment of a provisional liquidator but, subsequently, sought the appointment of an administrator, presumably because the provisional liquidator was not acting at his behest. At 101, Burchett J said:
"In support of its submission that the administration should end, or be stayed pending resolution of the cross-claim in proceedings G3114 of 1993, counsel for Aloridge referred to Argyle Art Centre Pty Ltd v Argyle Bonds & Free Stores Co Pty Ltd [1976] 1 NSWLR 377 at 386, which states the rule that a party who elects to pursue a remedy curially ought not to be permitted to seek to enforce it by other and more direct means. That was a landlord and tenant case. But company law itself provides illustrations of situations in which the court has preserved the status quo pending a decision upon a disputed liability. There are the cases where creditors' winding up applications have been restrained because the existence of the alleged debts remained to be determined as the subject of litigation. As regards cases of this kind, in Brinds Ltd v Offshore Oil NL (No 3) (1985) 10 ACLR 419 at 424, the Privy Council held:
It is a matter for the discretion of the judge whether a winding up order should be made on a disputed debt, and it is also a matter of discretion whether he decides the substantive question of debt or no debt."
Argyle Art Centre was a case of curial proceedings in a possession list ignored by the protagonist who simply took possession.
The other authority referred to by the applicants was Spacorp Australia Pty Ltd (Administrator apptd) v Fitzgerald & Ors [2001] VSC 61; (2001) 19 ACLC 979, where Beach J said at [27]-[28]:
"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."
While there is a general discretion under the Corporations Act , s 447A(1) abuse is a necessary element in reliance upon s 447A(2)(b). I do not think at this stage of the proceedings that the plaintiffs have been able to demonstrate that abuse.
It is said that there are practical difficulties in the appointment of an administrator. The receiver and managers are running the business and there is nothing for the administrator to administer.
The plaintiffs are seeking to refinance the company and it is submitted that negotiations with financiers will come to an end if they have knowledge of the fact that the company is in administration.
There is evidence of that belief, but negotiations have continued with reasonable prospects of success since the appointment of the administrator and, in my view, that ground for termination of the administration is premature.
On the appointment of the administrator the proceedings were stayed and the cross-claims will be in the hands of the administrator. But that is a consequence that will flow from the appointment of an administrator in circumstances where there are proceedings on foot. It does not constitute, in my view, a ground for terminating the administration on the basis of abuse.
It was the first defendant's correspondence with the first mortgagee in which the first mortgagee was asked for its consent to the appointment by the first defendant of a receiver or manager or a provisional liquidator that appears to have prompted the appointment of the receivers and manager in this case as this occurred shortly thereafter. Again I do not think that that circumstance is sufficient to justify the application.
Mr Coles QC who appeared for the first defendant, Rick Manietta Investments Pty Ltd, with Mr Baird submitted that its extracurial action in appointing an administrator was not in substitution for its disputed curial proceedings in debt against the plaintiffs, Welcome Hotel Pty Limited and Tinsar Pty Limited and it had not, relevantly, elected to proceed curially. It was no part of the administrator's function to sue for the debts.
Mr Cheshire, who with Mr Kulkarni appeared for Welcome Hotel and Tinsar submitted, correctly in my view, that the concept of election was not used in the sense of choosing between alternative rights. It might embrace rights that were cumulative.
In my view, the application is premature. There would be more substance to it if brought at a stage when refinancing had been negotiated successfully on the basis that new finance was conditional upon a successful application for the termination of the administration.
In the circumstances I dismiss the originating process with costs.
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Decision last updated: 16 December 2011
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