Wily re Wire Lagoon - [2003] NSWSC 997

Reported Decision:
48 ACSR 86

Supreme Court

CITATION: Wily re Wire Lagoon [2003] NSWSC 997

HEARING DATE(S): 29/09/03 (and written submissions 13/10/03)

JUDGMENT DATE:
5 November 2003

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: No order

CATCHWORDS: CORPORATIONS - winding up - compromise or arrangement with certain creditors - attempt to implement scheme affecting all creditors by deed between liquidator and some creditors - deed purports to give one party creditor benefits comparatively more favourable than benefits of non-party creditors - deed containing provisions apparently unworkable and of uncertain operation - direction that liquidator justified in giving effect to deed not made

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.446A, 477, 501, 506, 563C

CASES CITED: British Eagle International Air Lines Ltd v Compagnie Nationale Air France [1975] 1 WLR 758
Coulls v Bagot's Executor & Trustee Co Ltd (1967) 119 CLR 460
Horne v Chester & Fien Property Pty Ltd (1986) 11 ACLR 485
Isles v Daily Mail Newspaper Ltd (1912) 14 CLR 193
Mercantile Investment and General Trust Company v International Company of Mexico [1893] 1 Ch 484n
Re Slade Constructions Pty Ltd [1970] SASR 561
United States Trust Company of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131

PARTIES :
Andrew Hugh Jenner Wily as Liquidator of Wire Lagoon Pty Ltd (in liq) - Applicant

FILE NUMBER(S): SC 4830/03

COUNSEL: Mr J.K. Chippindall - Plaintiff

SOLICITORS: Bowles Lawyers Pty Ltd - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 5 NOVEMBER 2003

4830/03 – ANDREW HUGH JENNER WILY RE WIRE LAGOON PTY LTD (IN LIQUIDATION)

JUDGMENT

The application

1 The plaintiff is the liquidator of Wire Lagoon Pty Limited (“the Company”) under the form of creditors’ voluntary winding up that arises by virtue of s.446A of the Corporations Act 2001 (Cth) as a sequel to Part 5.3A administration. In that capacity, he seeks, by originating process filed on 12 September 2003, a direction that he is justified in making and giving effect to a deed between the Company, the plaintiff as its liquidator, three companies designed by the deed “Admitted Merchant Creditors”, three members of the Mackey family of Narrabri and H. Mackey Pty Ltd.

2 The liquidator says in his affidavit that the Company’s creditors fall mainly into two classes. One, confined to the Admitted Merchant Creditors, consists of named companies which provided various services to the Company including cotton ginning, the Company being a cotton grower in the Wee Waa district. The other main class of creditors is “Admitted Local Creditors”, being “ordinary unsecured creditors” which are “small businesses located primarily in the same regional area as the Company who had provided goods and services to the Company”. The purpose of the proposed deed, briefly stated, is to cause the claims of the Admitted Merchant Creditors and those of the Admitted Local Creditors in the winding up to be treated differently, so far as distribution of net assets in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Wily re Wire Lagoon

Details

AGLC: Wily re Wire Lagoon [2003] NSWSC 997
Case: [2003] NSWSC 997
Decision Date: 5 November 2003

CaseChat Overview and Summary

In the case, Wily re Wire Lagoon, the subject matter of the dispute involved a winding-up order concerning the corporation Wire Lagoon. The court had to determine the validity of a compromise or arrangement involving certain creditors and the liquidator. The arrangement was intended to affect all creditors through a deed executed between the liquidator and some creditors. However, the deed allegedly provided one creditor with benefits more favourable than those offered to non-party creditors. Additionally, the deed contained provisions that were considered unworkable and of uncertain operation.

The legal issues before the court included whether the deed could be implemented given its apparent inequality and unworkability. The court needed to assess the legitimacy of the arrangement and the liquidator's actions in attempting to enforce it. Specifically, the court had to decide whether the liquidator was justified in giving effect to the deed, considering its discriminatory and uncertain provisions.

The court held that the deed was not valid and that the liquidator was not justified in giving effect to it. The deed was found to provide unequal benefits to one creditor, which was contrary to the principle of equal treatment among creditors. Furthermore, the court found the deed's provisions to be unworkable and of uncertain operation, rendering the arrangement unenforceable. Consequently, the court ruled that the liquidator's attempt to implement the deed was unjustified.

In conclusion, the court did not direct the liquidator to give effect to the deed due to its discriminatory and unworkable nature. The final orders would likely involve the liquidator proceeding with a more equitable and feasible compromise arrangement that adheres to the principles of equal treatment and clarity.

Orders