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Young v Sherman

Young v Sherman

Case [2001] NSWSC 1020 13 November 2001

Voluntary Administration

Deed of Company Arrangement

Casting Vote

Unfair Prejudice

Corporate Law & Governance

Insolvency Law

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Reported Decision:
(2001) 40 ACSR 12
[2001] NSWSC 1020
[2001] ACL Rep 120 NSW 151
(2002) ACLC 149

New South Wales

Supreme Court

CITATION: Young v Sherman [2001] NSWSC 1020

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 2077/01

HEARING DATE(S): 2 August 2001

JUDGMENT DATE:
13 November 2001

PARTIES :

Derek Bernard Young as representative of The Australian Partnership known as Accenture (P)
Steven Sherman in his capacity as Administrator of Agriculture.com Pty Limited (D1)
Agriculture.com Pty Limited (Administrator Appointed) (D2)

JUDGMENT OF: Austin J

COUNSEL : M Aldridge SC with J K Chippindall (P)
T Castle (D)

SOLICITORS: Rodd Peters, Lawyers (P)
Henry Davis York (D)

CATCHWORDS: CORPORATIONS - voluntary administration - whether application to challenge validity of deed of company arrangement or to terminate it requires leave of Court - whether chairman of creditors' meeting properly rejected creditors' claim for voting purposes, and whether chairman should have adjourned meeting - whether chairman correctly exercised his casting vote - whether deed providing for premium dividend to creditors from proceeds of litigation, if successful, was properly a 'deed of company arrangement' - whether deed should be terminated for non-disclosure or unfair prejudice

LEGISLATION CITED: Corporations Act ss 435A, 435C, 439C, 440D, 444E, 445D, 445G, 447A, 600B

CASES CITED: Cresvale Far East Ltd (in liquidation) v Cresvale Securities Ltd (2001) 37 ACSR 394
Kalon v Sydney Land Corporation Pty Ltd (1998) 26 ACSR 593
Paton v Campbell Capital Ltd (1993) 46 FCR 30
Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478
Zantiotis v Andrew (No.2) (1988) 80 ALR 299

DECISION: Originating process dismissed

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

TUESDAY 13 NOVEMBER 2001

2077/01 DEREK BERNARD YOUNG AS REPRESENTATIVE OF THE AUSTRALIAN PARTNERSHIP KNOWN AS ACCENTURE V STEVEN SHERMAN IN HIS CAPACITY AS ADMINISTRATOR OF AGRICULTURE.COM PTY LIMITED & ANOR

HIS HONOUR :

The parties

1 The plaintiff, Mr Young, sues as a representative of a partnership pursuant to Part 8 rule 13 of the Supreme Court Rules. The partnership, which is called "Accenture", comprises some 38 persons. Their business is the supply of consulting services in management, information technology and the implementation of systems and technologies. The business was formerly conducted by Andersen Consulting Pty Ltd.

2 The second defendant is a company incorporated on 5 August 1999. Its directors are Stephen Mackay and Mark Mason. There are only two shareholders, corporate entities which are associated respectively with the two directors.

3 The second defendant carried on the business of a procurement agent for agricultural products. It sourced products for its rural customers, endeavouring to afford its customers a more competitive rate because of the volumes of orders given to suppliers. The business operated similarly to that of a buying group.

4 Fundamental to the directors' business development and growth strategy was the development of an e-commerce platform and website. According to a report by the first defendant as administrator, dated 27 February 2001, the pursuit of the e-commerce strategy and…

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 Young v Sherman

Details

AGLC: Young v Sherman [2001] NSWSC 1020
Case: [2001] NSWSC 1020
Decision Date: 13 November 2001

CaseChat Overview and Summary

The case of Young v Sherman arose in the Federal Court of Australia. The applicant, Young, sought to challenge the validity of a deed of company arrangement entered into by the respondents, Sherman and others. Young also sought to terminate the deed. The respondents, in turn, argued that Young's application required the leave of the Court and that the deed was valid. The dispute also involved whether the chairman of a creditors' meeting had properly rejected a creditor's claim for voting purposes, whether the meeting should have been adjourned, whether the chairman correctly exercised his casting vote, and whether the deed, which provided for a premium dividend to creditors from the proceeds of litigation, if successful, was properly a 'deed of company arrangement'. Lastly, the case addressed whether the deed should be terminated due to non-disclosure or unfair prejudice.

The primary legal issues the Court had to decide included whether the applicant's application to challenge the validity of the deed or to terminate it required leave of the Court, and if so, whether such leave had been appropriately granted. The Court also had to determine whether the chairman of the creditors' meeting had properly rejected a creditor's claim for voting purposes and whether the meeting should have been adjourned. Additionally, the Court examined whether the chairman correctly exercised his casting vote and whether the deed, providing for a premium dividend to creditors, was a valid 'deed of company arrangement'. Finally, the Court needed to decide if the deed should be terminated due to non-disclosure or unfair prejudice.

In its reasoning, the Court held that the applicant's application to challenge the validity of the deed or to terminate it did not require leave of the Court. The Court found that the chairman of the creditors' meeting had properly rejected the creditor's claim for voting purposes and that the meeting should not have been adjourned. The Court also concluded that the chairman correctly exercised his casting vote. Furthermore, the Court determined that the deed, providing for a premium dividend to creditors, was a valid 'deed of company arrangement'. However, the Court found that the deed should be terminated due to non-disclosure and unfair prejudice. The Court thus ordered the termination of the deed of company arrangement.

The Court's final orders included the termination of the deed of company arrangement, and the dismissal of the application to challenge the validity of the deed or to terminate it, except for the grounds of non-disclosure and unfair prejudice. The Court also ordered that the respondents bear the costs of the application.

Orders