Speers V De Vries and Ors [1999] NSWSC 7 (13 January 1999)

Last Updated: 1 February 1999

NEW SOUTH WALES SUPREME COURT

CITATION: SPEERS V DE VRIES & ORS [1999] NSWSC 7

CURRENT JURISDICTION:

FILE NUMBER(S): 5180/98

HEARING DATE{S): 13 January 1999

JUDGDMENT DATE: 13/01/1999

PARTIES:

JUDGMENT OF: Windeyer J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Mr. V.R.W. Gray (1st Defendant)

SOLICITORS:

Mr. McConnell of McConnell Jaffray (Plaintiff)

Mr. S. Hedge of Kemp Strang (2nd, 3rd & 4th Defendants)

CATCHWORDS:

ACTS CITED:

DECISION:

Order restraining first defendant as voluntary administrator dealing with property and cash deposit of Feluga Pty. Limited

JUDGMENT:

JUDGMENT

1. HIS HONOUR: This is an application for a continuation of an ex parte injunction granted by Levine J on 30 December 1998. As was explained and accepted earlier, the injunction was expressed to be until further order but it was accepted that the plaintiff should bear the responsibility of establishing today an entitlement for continuance of that injunction. It should further be noted that although no undertaking as to damages was given and, as I understand, no undertaking was given or offered as to damages on 30 December 1998, the undertaking as to damages is now offered and will be given if an injunction is ordered. I should say that the Court of Appeal has recently said that it is the responsibility of legal practitioners obtaining ex parte orders to offer the undertaking as to damages and not to leave it to the Judge in a busy and difficult time of the year to remember to ask for it.

2. The substantive claim of the plaintiff under the summons is for orders that the decision of the first defendant/administrator as to the identity of the creditors of the company and the amounts of the debts for which those creditors are entitled to prove was incorrect and should be set aside pursuant to regulation 5.6.26 of the regulations made under the Corporations Law.

3. If the position as to creditors and value as contended for by the plaintiff is found to be correct then it appears that a resolution proposed by the plaintiff's nominee at the first meeting of creditors, that Mr De Vries be removed as administrator and Mr Graham Butterell of Messrs Grant Thornton be appointed in his place, would have been passed. Thus one of the orders sought in the summons by paragraph 6 is an order equivalent to the resolution which failed.

4. Subject to whatever rights might or might not attach to some preference shares it seems that the shares in the company are held equally between the plaintiff and the second defendant. It also appears from the evidence and what has been said to me that it is almost certainly in the interests of the parties that the company, Fulager Pty Limited, be placed into liquidation. On the evidence as it stands before the court at the moment it is difficult to understand the basis on which the directors could have formed the opinion that the company is likely to become insolvent. In fact, upon the evidence as it is at the moment it is more likely that this was a way to achieve distribution of the company's assets. That, however, is a matter which would not appear to be giving rise to any prejudice to anybody and nothing further need be said about the procedure adopted as the plaintiff does not challenge the resolution of the directors to place the company into administration but rather seeks to challenge the particular administrator appointed for the purpose of the administration.

5. The question then for decision is, whether or not there is a serious question to be tried on the matter of whether or not the liquidator was correct when he admitted certain persons to vote as creditors in the amounts for which their debts were admitted and also, of course, whether or not his decision as to the value of the plaintiff's debt was correct or whether that debt should have been admitted for a greater amount. On the evidence before the court it seems that so far as the company records have been made available to the representative of the plaintiff, the third and fourth defendants were not shown as creditors in any of those records and neither were they shown in the original list of creditors prepared by Mr De Vries.

6. In the affidavit of Mr De Vries sworn 11 January 1999, he says that he has amended the original list of known creditors but, unfortunately, the amended list annexed to his affidavit is precisely the same as the original list also annexed to his affidavit. I imagine that there is some mistake in this but there is no additional evidence and I do not, therefore, know what the position is.

7. All that can be gained from this is the evidence of Miss Beckett that on the documents inspected by her and on the original list produced by the administrator, the third and fourth defendants were not shown to be creditors but they have now been admitted. As the only other evidence is that the administrator reported to the adjourned first meeting of creditors that after consideration he had decided that the third and fourth defendants should be admitted as creditors; it seems that there is at least a proper question to be tried on this matter.

8. The next question is whether or not the balance of convenience requires or is for a continuation of the existing injunctive order. It is not suggested that it should be continued in its present terms but rather that the administrator should be restrained from taking any steps to dispose of the assets of the company. The position at the present moment is that the second meeting of creditors will be held by 25 January. On that date the creditors will either have to decide that the company should execute a deed of company arrangement, or that the administration should end, or that the company should be wound up. If the company is wound up then the administrator will become the liquidator.

9. It is quite unlikely that there will be any deed of company arrangement. The court does not know at this stage whether or not the administrator will continue to accept the third and fourth defendants as creditors at the next meeting. The administrator noted that their inclusion in the list was objected to; he knows of these proceedings, and thus he may take some further steps to determine whether or not they should properly be included in the list of creditors.

10. While it is not clear that the administrator is about to take some steps to dispose of the company's properties he is certainly taking steps to put himself in the position under which they can readily be disposed of. I should add that he is the one who has resisted the restraint on his powers to dispose of those assets. There is no reason whatever, as I understand it, for any requirement for their early disposition and although there is no evidence which would suggest that Mr De Vries is not an entirely proper person to have the control of the company at the present time, the fact is that he would not have that control and the plaintiff's nominee would have that control, if the plaintiff's contention on the question of the creditors turns out to be correct.

11. In those circumstances, it seems to me that the appropriate course is to extend the existing injunction until a short period after the conclusion of the second meeting of creditors.

12. Order that the first defendant as voluntary administrator of that company be restrained:

(a) from entering into any contract for sale or lease of the properties of the company and

(b) from dealing with the cash deposit of the company other than to pay creditors (excluding the plaintiff and the second, third and fourth defendants).

Costs reserved.

Liberty to restore on twenty four hours notice.

LAST UPDATED: 22/01/1999