YOUNG (As representative for the Australian Partnership known as ACCENTURE) v SHERMAN & ANOR [2002] NSWCA 281 revised - 3/09/2002
FILE NUMBER(S):
CA 40991/01
HEARING DATE(S):
9 August 2002
JUDGMENT DATE:
28 August 2002
PARTIES :
Derek Young (As representative for the Australian Partnership known as Accenture) - Appellant Steven Sherman in his capacity as Administrator of Agriculture.Com Pty Ltd - First Respondent Agriculture.Com Pty Ltd - Second Respondent
JUDGMENT OF:
Sheller JA at 1; Hodgson JA at 70; Davies AJA at 79
LOWER COURT JURISDICTION :
Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :
20770/01
LOWER COURT JUDICIAL OFFICER :
Austin J
COUNSEL:
M Aldridge SC/D Ash - Appellants P M Wood/T D Castle - Respondents
SOLICITORS:
Rodd Peters Lawyers - Appellants Henry Davis York - Respondents
CATCHWORDS:
CORPORATIONS LAW - deed of company arrangement - premium payment to creditors to enter into deed - premium payment contrary to public policy - exercise of casting vote by administrator - requirement to disclose relevant matters to creditors - Corporations Act 2001 (Cth), ss 445D, 600B - Corporations Regulations 2001 (Cth), reg 5.6.21
1 Appeal allowed; 2 Set aside the orders of Austin J of 19 November 2001 dismissing the originating process and ordering the plaintiffs to pay the defendants' costs; 3 In lieu thereof, order; (a) that pursuant to s445D the deed of company arrangement made on 12 April 2001 between the company, Mr Sherman, MJ Mason Holdings Pty Limited and SRM Holdings Pty Limited be terminated forthwith; (b) that the proceedings be remitted to the Equity Division for further consideration.; 4 The respondents to pay the appellants' costs of the hearing before Austin J and of this appeal.
CA 40991/01 ED 2077/01
SHELLER JA HODGSON JA DAVIES AJA
YOUNG (As representative for the Australian Partnership known as ACCENTURE) v SHERMAN & ANOR
The proceedings involved a deed of company arrangement (the deed) entered into by creditors on the advice of the company's administrator, a respondent in these proceedings. The deed was opposed by the appellant, who was the company's largest creditor and the defendant in proposed litigation by the company.
The essence of the deed was that a "premium" of 10 cents in the dollar would be paid…
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.
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AGLC
Young v Sherman [2002] NSWCA 281
Case
[2002] NSWCA 281
Decision Date
CaseChat Overview and Summary
The appeal concerned a deed of company arrangement entered into by a company, Mr Sherman, MJ Mason Holdings Pty Limited, and SRM Holdings Pty Limited. The dispute arose from a premium payment made to creditors to induce them to enter into the deed, which the appellants argued was contrary to public policy. The matter was heard in the Court of Appeal of New South Wales.
The central legal issues before the court were whether the premium payment rendered the deed of company arrangement void as being contrary to public policy, and whether the administrator's exercise of a casting vote in favour of the deed, without full disclosure of relevant matters to creditors, invalidated the deed. The court was required to consider the application of sections 445D and 600B of the *Corporations Act 2001* (Cth) and regulation 5.6.21 of the *Corporations Regulations 2001* (Cth).
The Court of Appeal found that the premium payment was indeed contrary to public policy and therefore rendered the deed void. The court reasoned that such payments undermine the integrity of the insolvency process and the principle of equal treatment of creditors. Furthermore, the court held that the administrator had failed to disclose all relevant matters to the creditors, which was a requirement for the proper exercise of their powers and for the validity of the deed. Consequently, the court allowed the appeal, set aside the previous orders dismissing the originating process, and ordered that the deed of company arrangement be terminated. The proceedings were remitted to the Equity Division for further consideration, and the respondents were ordered to pay the appellants' costs.
Orders
Orders of the court
1 Appeal allowed; 2 Set aside the orders of Austin J of 19 November 2001 dismissing the originating process and ordering the plaintiffs to pay the defendants' costs; 3 In lieu thereof, order; (a) that pursuant to s445D the deed of company arrangement made on 12 April 2001 between the company, Mr Sherman, MJ Mason Holdings Pty Limited and SRM Holdings Pty Limited be terminated forthwith; (b) that the proceedings be remitted to the Equity Division for further consideration.; 4 The respondents to pay the appellants' costs of the hearing before Austin J and of this appeal.