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Nicol v ACN 114 392 577 Pty Ltd [2008] FCA 21 (15 January 2008)

Last Updated: 22 January 2008

FEDERAL COURT OF AUSTRALIA

Nicol v ACN 114 392 577 Pty Ltd [2008] FCA 21

COLIN MCINTOSH NICOL AND SAMUEL CHARLES DAVIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA AND THE SCHEME AND AS LIQUIDATORS OF THE SCHEME AND AS JOINT AND SEVERAL LIQUIDATORS OF PGLE PTY LTD (IN LIQUIDATION) ACN 100 635 658, KYTARA PTY LTD (IN LIQUIDATION) ACN 098 864 834, MERBEL PTY LTD (IN LIQUIDATION) ACN 073 274 683, MERCORELLA (PIRIE STREET) PTY LTD (IN LIQUIDATION) ACN 101 826 439, SANCAT PTY LTD (IN LIQUIDATION) ACN 093 882 654, T & G MERCORELLA PTY LTD (IN LIQUIDATION) ACN 101 934 516, MZF PTY LTD (IN LIQUIDATION) ACN 099 040 641, OPEY PTY LTD (IN LIQUIDATION) ACN 062 805 109, UNLEY FINANCIAL STRATEGIES PTY LTD (IN LIQUIDATION) ACN 096 679 837, WOL PROPERTIES PTY LTD (IN LIQUIDATION) ACN 082 339 366 v ACN 114 392 577 PTY LTD, ANTHONY JOHN SOBEY AND AJAY HOLDINGS PTY LTD ACN 112 818 121

SAD 205 OF 2005

MANSFIELD J
15 JANUARY 2008
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 205 OF 2005

BETWEEN:

AND:

ACN 114 392 577 PTY LTD
First Defendant

ANTHONY JOHN SOBEY
Second Defendant

AJAY HOLDINGS PTY LTD ACN 112 818 121
Third Defendant

JUDGE:	MANSFIELD J
DATE OF ORDER:	15 JANUARY 2008
WHERE MADE:	ADELAIDE

THE COURT DECLARES THAT:

The parties by the exchange of correspondence between their respective solicitors dated 18 and 19 September 2007 entered into a binding and enforceable agreement between them by which they agreed to resolve the issues between them as identified in the plaintiffs’ notice of motion of 15 December 2006 as amended on 16 March 2007.

THE COURT ORDERS THAT:

1. The defendants pay to the plaintiffs the sum of $125,000.
2. The defendants pay to the plaintiffs interest at the rate of 10% per annum on the sum of $125,000 from 19 October 2007.
3. The defendants pay to the plaintiffs costs of and incidental to their motion of 13 December 2007.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 205 OF 2005

BETWEEN:

AND:

ACN 114 392 577 PTY LTD
First Defendant

ANTHONY JOHN SOBEY
Second Defendant

AJAY HOLDINGS PTY LTD ACN 112 818 121
Third Defendant

JUDGE:	MANSFIELD J
DATE:	15 JANUARY 2008
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1 On 8 August 2005, Colin Nicol was appointed as Receiver and Manager of the property of Guiseppe Mercorella and of an unregistered management investment scheme (the Scheme) operated by Mercorella, and as liquidator of the Scheme. On 29 September 2005, Mr Nicol was appointed as Liquidator of the scheme companies named below. On 3 August 2006, Samuel Davies was appointed as joint and several receiver and manager, and liquidator with Mr Nicol. The Scheme companies are PGLE Pty Ltd (In Liquidation) ACN 100 635 658, Kytara Pty Ltd (In Liquidation) ACN 098 864 834, Merbel Pty Ltd (In Liquidation) ACN 073 274 683, Mercorella (Pirie Street) Pty Ltd (In Liquidation) ACN 101 826 439, Sancat Pty Ltd (In Liquidation) ACN 093 882 654, T & G Mercorella Pty Ltd (In Liquidation) ACN 101 934 516, MZF Pty Ltd (In Liquidation) ACN 099 040 641, Opey Pty Ltd (In Liquidation) ACN 062 805 109, Unley Financial Strategies Pty Ltd (In Liquidation) ACN 096 679 837 and Wol Properties Pty Ltd (In Liquidation) ACN 082 339 366.

2 On 6 September 2005, Mr Nicol brought an urgent application for interlocutory relief to restrain the first defendant from appointing a receiver, or receiver and manager, or controller, or administrator over the Scheme companies, or from enforcing any security granted in its favour by those companies. Orders were made on that day, extended from time to time on an interlocutory basis, and until the events referred to below remained extant.

3 On 15 December 2006, by motion, Mr Nichol (Mr Davies was subsequently joined as a plaintiff on 19 January 2007) sought various final orders against the first defendant in relation to the purported interests of the first defendant in the Scheme and the Scheme companies. It was claimed that the transactions by which the first defendant claimed to have an interest in, or a security over, the assets of the Scheme or the Scheme companies, were shams and had not occurred at all. It also sought a declaration that no money had been secured by the various charges over the Scheme companies. Alternatively, Mr Nicol sought a declaration that the transactions by which those securities were granted were uncommercial, were insolvent transactions, and were voidable transactions, and sought an order that the charges be declared null and void.

4 Because of the involvement of the second and third defendants in the process by which the first defendant claimed to have those various securities, on 16 March 2007 the motion was amended to seek declaratory relief as to the status of the second defendant and as to the status of the third defendant in relation to those transactions, and the second and third defendants were joined as defendants to that proceeding. Appearances were entered by solicitors for the defendants, the same solicitors in each instance, on behalf of the first defendant on 9 March 2007, and on behalf of the second and third defendants on 20 April 2007.

5 Subsequently there were negotiations between the solicitors for the parties to explore the prospects of resolution of the issues between them. On 18 September 2007, the solicitors for the plaintiffs made a settlement proposal by letter to the solicitors for the defendants. That proposal was that the proceedings against the defendants be discontinued on the seven specified terms that follow.

1. Your clients discharge the securities held by ACN 114 over the assets of the Scheme and the Scheme Companies by 20 September 2007. We have prepared, at our cost, the necessary discharge documents and enclose them for execution by your client ACN 114. The executed copies of these documents need to be returned to us by 20 September 2007;

2. ACN 114 withdraws any claim it may have against Mercorella, the Scheme and the Scheme Companies, but the investors who stand behind ACN 114 (which may include Mr Sobey), being the parties who lent monies to Mr Mercorella and the Scheme, remain free to lodge proofs of debt in the liquidation of the Scheme and in the bankrupt estate of Mr Mercorella, whose trustee is Mr Robert Ferguson;

3. Our clients will provide you with a copy of all documents which have been produced at the examinations of Thomson Playford, BCFR and Basso Newman & Co, and any other documents which may reasonably be requested by your clients to the extent that such documents are not confidential or subject to legal professional privilege, or otherwise unable to be disclosed to you as a result of court order, at a cost of $1.00 per page;

4. Our clients will provide such assistance as may reasonably be required of them by your clients and as may be proper for a liquidator to provide, to your clients for the purpose of your clients prosecuting against other parties such claims in respect of the securities as they may be advised, provided our clients are reimbursed for their fees and expenses in providing such assistance;

5. Your clients will assist our clients to locate any assets of Mercorella and related interests and, to the extent that your clients are able to assist with the location and recovery of assets presently unknown or unable to be recovered by our clients, our clients will agree to pay your clients a fee of up to 40% of the recovered amount, nett of recovery costs, with the terms of any fee to be agreed in advance and dependant upon such things as the quality of information provided by your client, the level of assistance provided, the quantum of the amount recovered and such other factors as may be agreed from time to time; and

6.
Your clients pay our clients’ costs of the proceedings fixed at $150,000, with a first payment of $50,000 to be made by 18 October 2007, and a second and final instalment of $100,000 by 14 March 2008. Interest will accrue at the rate of 10% pa on the unpaid balance until the debt is discharged in full, and in the event that the first instalment is not paid by the due date, then the whole of the balance payable will become immediately due and payable;

7. The terms of any settlement reached upon acceptance of this proposal will be confidential in so far as the terms contained in paragraphs 3, 4 and 5 above are concerned, and may not be disclosed except as required by law or by order of court, or with the written consent of the other party.

6 On 19 September 2007, the defendants, by their solicitors, indicated that the defendants accepted the matters contained in paras 1 to 7 of the letter from the plaintiffs’ solicitors of 18 September 2007 as the basis on which the matter had been settled. They also indicated that the documents which were required to be executed, in particular by the first defendant, to secure the release of the various securities and to notify formally the release or discharge of property from those securities would be executed. The various documents were, in fact, duly executed on 19 September 2007. To that extent, the defendants complied specifically with the terms of the settlement agreement.

7 It is the issue of costs which remains outstanding.

8 Clause 6 of the agreement had the effect that the costs of the plaintiffs of the proceedings as against the defendants be fixed at $150,000, with the first payment of $50,000 to be made on 18 October 2007, and a second and final payment of $100,000 to be made by 14 March 2008. It was also agreed that interest would accrue at the rate of 10% per annum on the unpaid balance until the debt was discharged in full, and specifically that in the event that the first instalment was not paid by the due date, then the whole of the balance would become immediately due and payable.

9 In fact, the first instalment of $50,000 was not paid on 18 October 2007. The sum of $25,000 was paid on 31 October 2007, but no further payments have been made, despite demands for payment of the remainder of the debt.

Consequently, on 13 December 2007, by motion, the plaintiffs have sought enforcement of the agreement to the extent to which it remains unperformed by the defendants. In particular, they claim that from 19 October 2007, the full amount of the costs agreed to be paid became immediately due and payable because of default in payment of the first instalment of $50,000, and that there remains outstanding the sum of $125,000 in light of the payment of $25,000 made on 31 October 2007.

11 The defendants have not appeared on the hearing of the motion. They have been called and there is no appearance. The defendants, I am satisfied, have been served with the proceedings by service upon their solicitors at their address for service, as identified in their respective appearances. The matter first came on for directions on 21 December 2007. The motion of 13 December 2007 had been served only a short time before, and the defendants did not then appear. I gave further directions on that date, fixing today for the hearing date and requiring further service of the motion, the supporting material, and of the orders made on 21 December 2007. I am satisfied that those documents were duly served upon the defendants and they have apparently simply chosen not to appear today. They have not communicated at all since 13 December 2007 with the solicitors for the plaintiffs. There is no indication that they wish to resist the orders sought by the motion or have any foundation for doing so. In those circumstances, I see no reason why I should not proceed to deal with the motion.

12 In my view, on the facts, the plaintiffs’ claim is obviously well founded. The plaintiffs now seek an order for payment of the outstanding agreed costs and interest. I propose to make that order. There is no doubt that the Court has jurisdiction to enforce a compromise agreement of a claim made in original proceedings in which the court has jurisdiction. See Jarraman Arts Aboriginal Corporation v Tourism Australia [2005] FCA 983; (2005) 144 FCR 233 at 247 and the cases there cited. Accordingly, I declare that the parties, by the exchange of correspondence between their respective solicitors, dated 18 and 19 September 2007, entered into a binding and enforceable agreement between them by which they agreed to resolve the issues between them, as identified in the plaintiffs’ notice of motion of 15 December 2006 as amended on 16 March 2007. I then order that:

1. The defendants pay to the plaintiffs the sum of $125,000.
2. The defendants pay to the plaintiffs interest at the rate of 10% per annum on the sum of $125,000 from 19 October 2007.
3. The defendants pay to the plaintiffs costs of and incidental to their motion of 13 December 2007, including the hearing of the motion.

13 It is apparent from the orders sought by the plaintiffs that they have not sought interest on the sum of $25,000 between 19 and 31 October 2007.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate:

Dated: 18 January 2008

Counsel for the Applicant:	Mr R Mansueto

Solicitor for the Plaintiffs:	Minter Ellison

Counsel for the Defendants:	The Defendants did not appear

Date of Hearing:	15 January 2008

Date of Judgment:	15 January 2008

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