Sheahan & Ian Lock as administrators of Valofo Pty Ltd [2009] NSWSC 1039 (14 September 2009)

Last Updated: 6 October 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Sheahan & Ian Lock as administrators of Valofo Pty Ltd [2009] NSWSC 1039


JURISDICTION:
Equity

FILE NUMBER(S):
4058/09

HEARING DATE(S):
14/09/09

JUDGMENT DATE:
14 September 2009

EX TEMPORE DATE:
14 September 2009

PARTIES:
John Sheahan and Ian Lock as administrators of Valofo Pty Ltd

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Applicants: S Burchett
Respondent: P Braham

SOLICITORS:
Applicants: Purcell Insolvency Lawyers
Respondent: n/a


CATCHWORDS:
CORPORATIONS – examination summons – application for access to affidavit filed by administrators on their application for examination summonses – applicant demonstrates arguable case for an order that examination summons be set aside - no prejudice to administrators if affidavit disclosed – affidavit made available for inspection

LEGISLATION CITED:
Corporations Act 2001 (Cth)


CASES CITED:
Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36
Ariff v Fong [2007] NSWCA 183; (2007) 25 ACLC 1079
Flanders v Beatty [1995] VICSC 73; (1995) 16 ACSR 324

TEXTS CITED:


DECISION:
Order in accordance with para 6 of the interlocutory process.



JUDGMENT:

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


WHITE J

Monday, 14 September 2009

4058/09 John Sheahan and Ian Lock as administrators of Valofo Pty Ltd

JUDGMENT

1 HIS HONOUR: The applicant, Mr Peter Londish, seeks, amongst other relief, a declaration that the respondents have not been validly appointed as administrators of Valofo Pty Ltd.

2 On 13 August 2009, a summons for examination of the applicant and orders for production of documents were issued by the Court on the application of the respondent administrators. Mr Peter Londish also seeks orders that the summons for examination and the orders for production be set aside. Those applications are listed for hearing on 2 October.

3 In the present application, Mr Peter Londish seeks access to the affidavit filed by the administrators on their application for summonses under s 596B of the Corporations Act 2001 (Cth).

4 In Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36, Basten JA said at [141]:

“... As is illustrated by Fetzer v Irving as Liquidator of Mawson KLM Holdings Pty Ltd (In Liq) [2005] SASC 53; (2005) 91 SASR 54 at 59 [27]–[28], an applicant for disclosure of the affidavit will generally be able to obtain access to the affidavit if he or she can demonstrate an arguable case that the issue of the summons exceeded the power of the court under s 596B and that access to the affidavit is likely to assist in determining the correctness of the challenge. ... If [the claimants] had an arguable case, they had good prospects of obtaining access to the affidavit. ...”

This was accepted as correct in Ariff v Fong [2007] NSWCA 183; (2007) 25 ACLC 1079 at [25]- [26].

5 At least once an applicant for an order that the examination summons be set aside has demonstrated an arguable case for that relief, it is usually preferable for the Court to examine the affidavit to assess whether disclosure of the contents would be prejudicial to the liquidator or administrator.

6 No evidence was led for the administrators on this application. They accept that there is an arguable case that their purported appointment by the persons professing to be the directors of Valofo was invalid. The applicant's evidence establishes a prima facie case that he remains a director of Valofo and had no notice of the meeting of directors at which the administrators were purportedly appointed. His evidence establishes a prima facie case that Mr Sid Londish, (who purportedly voted for the resolution as a director), was not a director of the company. However, the affidavit filed under s 596C would not be relevant to these grounds of challenge. Access to the affidavit is not likely to assist in determining the correctness of those grounds.

7 The applicant's evidence also establishes an arguable case that Messrs Bowman and Sid Londish were not of the opinion Valofo was insolvent or likely to become insolvent. The applicant's evidence establishes an arguable case that the purpose of those persons in purportedly appointing the administrators was to advance their position in disputes they have with Mr Peter Londish in relation to matters of accounting between their respective families.

8 On the applicant's evidence, there is an arguable case that the persons who have attended the first and second meetings of creditors as creditors of Valofo are not creditors of Valofo. There is no direct evidence impugning the administrators' purpose in seeking the issue of examination summonses, but it is an available inference that the summonses were not issued for a purpose which would fairly be expected to advance the course of the administration (Flanders v Beatty [1995] VICSC 73; (1995) 16 ACSR 324 at 333).

9 The object of Pt 5.3A is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence, or, if that is not possible, results in a better return for the company's creditors and members than would result from an immediate winding-up.

10 At the first and second meeting of creditors, the only creditors in attendance were companies or persons associated with Mr Bowman and Mr Sid Londish who claim to be creditors of Valofo in sums totalling $36,500. The administrators have led no evidence of the existence of any other creditors, nor have they tendered the report to creditors provided before the second meeting of creditors. That meeting was held on 19 August 2009.

11 At the second meeting of creditors, the creditors attending approved payment of administrators’ fees of $46,896.51 and also approved fees to be paid to the administrators to be calculated at a rate of $600 per hour, plus GST, plus 7.5 percent of net recoveries. It is arguable that these arrangements suggest that the appointment of the administrators was not made by the persons purporting to be directors with a view to discharging the company's liabilities or arranging for its liabilities to be discharged. It is arguable that the purpose of those appointing the administrators was not a proper purpose.

12 The originating process for the issue of the examination summonses was filed on 11 August 2009, a day after the date of the second report to creditors. The minutes of the second meeting of creditors record that the administrators observed that no proposal of a deed of company arrangement had been received and the administrators recommended the company be placed into liquidation. Mr Bowman and Mrs Linda Londish are recorded as having advised that the directors were considering a deed of company arrangement and needed more time to provide a proposal to the administrators.

13 It is arguable that the administrators' purpose in issuing the examination summonses was not to enable them to complete a report to creditors, as the report had already been provided, nor to advance a proposed deed of company arrangement, because they recommended that the company be placed into liquidation. It is arguable, on the present materials, that the purpose which might be attributed to Mr Bowman and Mr Sid Londish might also be attributed to the administrators, and it is arguable that that purpose would be an ulterior or collateral purpose to the advancement of the administration.

14 In those circumstances, I have examined the affidavit.

15 I do not think that there would be any prejudice to the administrators if the affidavit was disclosed. Indeed, it does not seem to me to go much beyond the matters adverted to in the course of submissions by counsel for the administrators as to why the examination summonses were prima facie appropriate. The affidavit is likely to be material in determining whether the allegations made by the present applicant, in so far as they affect the administrators, as well as Mr Bowman and Mr Sid Londish, are correct (Ariff v Fong at [91]). In these circumstances, I consider that the affidavit ought to be disclosed and I make the order sought in paragraph 6 of the interlocutory process.

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LAST UPDATED:
1 October 2009