White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) (No 4)

[2018] FCA 1436

FEDERAL COURT OF AUSTRALIA

White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) (No 4) [2018] FCA 1436

File number:	NSD 318 of 2018
Judge:	PERRAM J
Date of judgment:	19 September 2018
Cases cited:	White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) (No 3) [2018] FCA 711
Date of hearing:	18 September 2018
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	No Catchwords
Number of paragraphs:	8
Counsel for the Plaintiffs:	Ms J A Granger
Solicitor for the Plaintiffs:	King & Wood Mallesons
Counsel for Interested Person (Jadig Investments Pty Ltd):	Mr M L Rose
Solicitor for Interested Person (Jadig Investments Pty Ltd):	SBA Law
Solicitor for Interested Persons (Edgar Hung and Trevor Chappell):	Mr T D Tzovaras of Tzovaras Legal (Australia) Pty Ltd
Solicitor for Interested Person (Estate of J Idelson):	Mr T J Benjamin of Benjamin Lawyers

ORDERS

NSD 318 of 2018

IN THE MATTER OF MOSSGREEN PTY LTD (ADMINISTRATORS APPOINTED) ACN 163 353 053

JAMES MICHAEL WHITE, ANDREW THOMAS SALLWAY AND NICHOLAS JOHN MARTIN IN THEIR CAPACITIES AS VOLUNTARY ADMINISTRATORS OF MOSSGREEN PTY LTD (ADMINISTRATORS APPOINTED ACN 163 353 053)

First Plaintiff

MOSSGREEN PTY LTD (ADMINISTRATORS APPOINTED ACN 163 353 053)

Second Plaintiff

JUDGE:	PERRAM J
DATE OF ORDER:	19 SEPTEMBER 2018

THE COURT ORDERS THAT:

1.The First Plaintiffs file an amended Originating Process by 5pm on 21 September 2018 limiting its application under Prayer 6 for a declaration and directions in relation to cash and receivables to an application regarding whether, in circumstances where unpaid vendors were afforded an opportunity to assert a proprietary interest in accordance with the Court’s orders on 21 May 2018 and have failed to do so, they are justified in treating and having treated:

(a)monies held in the Company’s Bank Accounts (as defined in Mr White’s Affidavit) as the date of the appointment of Administrators on 21 December 2017 (Relevant Date) as assets of the Second Plaintiff; and

(b)monies received by the Company on or following the Relevant Date as assets of the Second Plaintiff

(the Amended Prayer 6 Application)

2.The First Plaintiffs and any other party wishing to make submissions relating to the Amended Prayer 6 Application must file and serve written submissions by 2 October 2018.

3.The First Plaintiffs be indemnified for their reasonable costs and expenses, including their remuneration, of and incidental to the determination of Prayer 6 of the Originating Process filed on 6 March 2018 (including the Amended Prayer 6 Application) from monies held in the Company’s Bank Accounts (as defined in Mr White’s Affidavit) and/or monies received by the Company on or following the Relevant Date.

4.The Amended Prayer 6 Application be listed for hearing on 19 October 2018 at 9.30am.

5.The interlocutory process filed by Jadig Investments Pty Ltd be stood over for further directions on 19 October 2018.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1. On 21 May 2018 I directed that any unpaid vendor wishing to make a proprietary claim on the assets of Mossgreen Pty Ltd (Administrators Appointed) (‘Company’) apply for leave to proceed against the Company by 14 August 2018:  White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) (No 3) [2018] FCA 711 (‘Mossgreen (No 3)’).  I indicated that if any such application were made by that date I would grant leave to proceed against the Company.  Pending that occurring the proceeding was stood over to yesterday, 18 September 2018.  The intent of those orders was to organise the proprietary claims of the trust claimants.  No applications have been made by any of those claimants.

2. Amongst other things the liquidators now propose to apply for a direction that they have been and would be entitled to proceed on the basis that that the assets in their hands are assets of the Company.  On the face of it is difficult to see why such an order facilitating that application should not be made where, after ample opportunity, no trust claimants have come forward.

3. At the case management hearing yesterday, however, several unpaid vendors did appear to resist the making of that order.  The first were the claims of Mr Hung and Mr Chappell.  They were represented by Mr Tzovaras.  He submitted that:

   ·they had not brought a claim by 14 August 2018 because it was too risky for them to do so in terms of costs;

   ·I should permit preliminary discovery to ascertain, as I apprehend it, whether there is a claim against the liquidators;

   ·they would not be able to sue the liquidators because they could not join the trustee (i.e. the Company) without being granted leave; and

   ·I should adjourn the proceeding to allow them a short time to put on a formal application to apply under my previous orders for leave to proceed.

4. The second unpaid vendor claim was the Estate of Idelson which was represented by one of its trustees, Mr Benjamin.  He explained to me that:

   ·the representative procedure, which I decided on the last occasion should not be pursued, was a better outcome than the procedure I ultimately adopted;

   ·the order I had made put the unpaid vendors in a bad situation since they would be at risk as to costs which in the case of many of the smaller claims made them sub-economic;

   ·the estate had assumed that the largest unpaid vendor, the Estate of Hickinbotham, would make a proprietary claim but it had not which had been unexpected  (for completeness, the Estate of Hickinbotham has decided to sue the directors instead); and

   ·I should not proceed to deal with the assets on the basis that there were no trust claimants.

5. Although I am sympathetic to all of these submissions, I do not accept them.  The choice confronting the Court on the last occasion was between a series of unattractive options.  The choice of allowing the unpaid vendors claims to be litigated at their own expense was the least unattractive option.  Although Mr Benjamin sought again to persuade me that appointing a representative party was the better option he ignores the fact that the secured creditor had indicated that it would pursue any such party for costs.  It remains my view that no person will fill the role of representative party whilst the secured creditor maintains that position.  Mr Benjamin’s proposal is, therefore, a better outcome save for the inconvenient fact that it is impossible: see Mossgreen (No 3) at [12].

6. The unpaid vendors have had many months to sort out what they are going to do.  I am not disposed to hold this process up any longer.  In that circumstance, I will make orders 1 and 2 as sought by the liquidators.  I should note that those orders do not prevent Mr Tzovaras or Mr Benjamin from making submissions that I should not make a direction in the form of the Amended Prayer 6.  That is presently a difficult argument given the absence of any unpaid vendor claims but they are still entitled to be heard.  I will list the Amended Prayer 6 for hearing at 9.30 am on 19 October 2018.

7. The liquidators sought an order that they be indemnified out of the Company’s assets for the purpose of Amended Prayer 6.  It seems to me that they are fulfilling an orthodox role in the orderly winding up of the Company.  They should have their indemnity.

8. I will stand over the secured creditor’s interlocutory process over to 19 October 2018 when I would expect to make procedural directions for its preparation for hearing.

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate: 

Dated:        19 September 2018