CATCHWORDS
CORPORATIONS - management and administration - external administration - application to vary deed of company arrangement - original deed drawn on erroneous assumption - extent of operation of s445G of Corporations Law - width of discretion conferred on the court by s447A - whether appropriate in the circumstances to exercise discretion to vary deed - factors applicable to exercise of discretion.
Corporations Law ss 444G, 445G(1) and 447A
Re GIGA Investments Pty Ltd (Admin Apptd.) (1995) 13 ACLC 1185
No SG 3184 of 1995
BRUCE NEIL MULVANEY v ROB WINTULICH PTY LTD (ACN 007 782 121), TREBOR PTY LTD (ACN 007 849 229), FRANK WALTER WINTULICH and THE DECEASED ESTATE OF THELMA LILLIAN WINTULICH
Branson J
Adelaide
16 October 1995
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No SG 3184 of 1995
)
GENERAL DIVISION )
BETWEEN:
BRUCE NEIL MULVANEY
Applicant
- and -
ROB WINTULICH PTY LTD
(ACN 007 782 121)
First Respondent
- and -
TREBOR PTY LTD
(ACN 007 849 229)
Second Respondent
- and -
FRANK WALTER WINTULICH
Third Respondent
- and -
THE DECEASED ESTATE OF THELMA LILLIAN WINTULICH
Fourth Respondent
MINUTES OF ORDER
CORAM: Branson J
PLACE: Adelaide
DATE: 16 October 1995
THE COURT ORDERS THAT:
1. Service of the notice of motion dated 13 October 1995 is dispensed with.
2. The deed of company arrangement executed on 19 September 1995 is varied by the deletion of the present clause 3B.1 and its replacement by the following clause:-
"3B.1 One (1) clear business day prior to the Operation Date the shareholders listed in Schedule A shall deliver duly executed transfers of all of their shares in Wintulichs to the Administrator or as directed by the Administrator for a total consideration of $1.00 being paid to each of the shareholders by the consortium of investors subject to the consortium of investors making a further payment of $12,600.00 to Robert Wintulich, a director of Wintulichs, and Rob Wintulich Pty Ltd and Trebor Pty Ltd by way of reimbursement of legal fees and other expenses incurred by him in negotiating the settlement of a long outstanding dispute with Wintulichs Pty Ltd. That payment is in full and final settlement and satisfaction of all and any disputes between Wintulichs Pty Ltd, Robert Wintulich, Trebor Pty Ltd, the deceased estate of Thelma Lillian Wintulich, John Wintulich Pty Ltd, Huxley Pty Ltd and Frank Wintulich. The Administrator will cause the share transfers to be allocated to the consortium of investors pro rata according to their respective contributions of capital and hand them over to the consortium of investors on the Operation Date."
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) No SG 3184 of 1995
)
GENERAL DIVISION )
BETWEEN:
BRUCE NEIL MULVANEY
Applicant
- and -
ROB WINTULICH PTY LTD
(ACN 007 782 121)
First Respondent
- and -
TREBOR PTY LTD
(ACN 007 849 229)
Second Respondent
- and -
FRANK WALTER WINTULICH
Third Respondent
- and -
THE DECEASED ESTATE OF THELMA LILLIAN WINTULICH
Fourth Respondent
EX TEMPORE REASONS FOR DECISION
CORAM: Branson J
PLACE: Adelaide
DATE: 16 October 1995
The administrator of Wintulichs Pty Ltd (subject to a deed of company arrangement) ("Wintulichs") by notice of motion dated 13 October 1995 has moved the Court for orders that service of the notice of motion be dispensed with and that the deed of
company arrangement in this matter ("the deed") executed on 19 September 1995 be varied by:-
(a) an order declaring clause 3B.1 thereof to be void; and
(b) an order for the inclusion of a new paragraph 3B.1.
The deed recites that its purpose includes the transfer of certain shares in Wintulichs ("the shares") to a consortium of investors ("the consortium"). Clause 3B.1 of the deed provides for the transfer by certain identified shareholders in Wintulichs of all of their shares in Wintulichs for a total consideration of $1.00 to be paid by the consortium.
It appears that clause 3B.1 of the deed was drawn on the assumption that s444G of the Corporations Law would empower the administrator of Wintulich's ("the administrator") to compel the shareholders identified for the purpose of clause 3B.1 to transfer their shares for the nominal consideration provided for by the clause. Certain of them declined to do so. O'Loughlin J of this Court has held that s444G of the Corporations Law does not empower the administrator to compel them to do so.
The date provided under the deed, as extended by agreement, for the consortium to provide funds to the administrator in accordance with the terms of the deed ("the Operation Date") is Tuesday, 17 October 1995 - i.e. tomorrow. The transfer of the share is a necessary precondition to the provision of such funds.
An agreement ("the agreement") has now been reached between the consortium and the owners of the shares as to the conditions upon which such shares will be transferred. Such agreement involves a payment of $12,600 to one such shareholder, Mr Robert Wintulich, "... by way of reimbursement of legal fees and other expenses incurred by him in negotiating the settlement of a long outstanding dispute with the company" and further "... in full and final settlement and satisfaction of all and any dispute between the company and Robert Wintulich and any of his related corporations or entities." The payment to Mr Robert Wintulich by the consortium does not affect in any way the amounts otherwise to be paid by the consortium for the benefit of the creditors of Wintulichs. It does not appear that any party to the deed will be adversely affected by this agreement. Other shareholders in the same position as Mr Robert Wintulich with respect to the deed are signatories to the agreement and are thus aware of the payment to be made to him.
Reliance was initially placed on s445G of the Corporations Law. Section 445G(1) provides as follows:-
"Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed .... may apply to the Court for an order under this section."
I am not satisfied that a specific ground has been identified which gives rise to doubt as to whether the deed was entered into in accordance with Part 5.3A of the Corporations Law or as to whether the deed complies with such part. I state expressly that, in my view, doubt on a specific ground must be identified in respect of both limbs of s445G(1).
The narrow field of operation of s445G of the Corporations Law is, in my view, understandable. The ordinary position under Part 5.3A of the Corporations Law is that a variation of a deed of company arrangement is to be achieved by a resolution passed at a meeting of the company's creditors convened under s445F of the Corporations Law.
In the alternative to the placing of reliance on s445G of the Corporations Law, counsel for the administrator placed reliance on s447A of the Corporations Law. Section 447A is in the following terms:-
"(1)The Court may make such orders as it thinks appropriate about how this Part [i.e. Part 5.3A] is to operate in relation to a particular company.
(2)For example, if the Court is satisfied that the administration of the company should end:
(a) because the company is solvent; or
(b) because provisions of this Part are being abused; or
(c) for some other reason;
the Court may order under subsection (1) that the administration is to end.
(3)An order may be made subject to conditions.
(4)An order may be made on the application of:
(a) the company; or
(b) a creditor of the company; or
(c) in the case of a company under administration - the administrator of the company; or
(d) in the case of a company that has executed a deed of company arrangement - the deed's administrator; or
(e) the Commission; or
(f) any other interested person."
It was necessary for me to give consideration to the width of the power given to the Court by s447A in Re GIGA Investments Pty Ltd (Admin Apptd.) (1995) 13 ACLC 1185 ("GIGA"). After considering relevant authorities I there stated at p1187:-
"I conclude that s447A gives the court wide discretionary powers to make orders such as those here sought. That is, orders which alter what would otherwise be the operation of Division 5 of Pt5.3A of the Corporations Law in relation to GIGA in that they set aside a disputed resolution of creditors and, in effect, require fresh compliance with Division 5 according to a timetable set by the Court."
I do not propose here to re-examine the authorities considered by me in the GIGA case. I am satisfied that s447A of the Corporations Law empowers the Court to alter the operation of Division 11 of Part 5.3A of the Corporations Law so as to allow, in appropriate circumstances, a deed of company arrangement to be varied, not by a resolution passed at a meeting of the company's creditors convened under s445F of the Corporations Law, but by orders of the Court.
On the question of whether it would be an appropriate exercise of my discretion in the circumstances of this case to make the orders sought in this case, I have concluded that it would be.
The variation sought does not affect the interests of creditors. Persons whose interests it might be thought to affect (i.e. other shareholders in the position of Mr Robert Wintulich) have joined in the agreement which gives rise to the variation. A meeting of creditors of Wintulichs cannot now practically be convened before the Operation Date. If convened earlier such meeting would have resulted in appreciable, and arguably unnecessary, costs being incurred by the administrator, and in some inconvenience to creditors.
It will be ordered that service of the notice of motion dated 13 October 1995 is dispensed with and that the deed is varied by the deletion of the present clause 3B.1 and its replacement by the following clause:-
"3B.1 One (1) clear business day prior to the
Operation Date the shareholders listed in Schedule A shall deliver duly
executed transfers of all of their shares in Wintulichs to the Administrator or
as directed by the Administrator for a total consideration of $1.00 being paid
to each of the shareholders by the consortium of investors subject to the consortium
of investors making a further payment of $12,600.00 to Robert Wintulich, a
director of Wintulichs, and Rob Wintulich Pty Ltd and Trebor Pty Ltd by way of
reimbursement of legal fees and other expenses incurred by him in negotiating
the settlement of a long outstanding dispute with Wintulichs Pty Ltd. That payment is in full and final settlement
and satisfaction of all and any disputes between Wintulichs Pty Ltd, Robert
Wintulich, Trebor Pty Ltd, the deceased estate of Thelma
Lillian Wintulich, John Wintulich Pty Ltd, Huxley Pty Ltd and Frank
Wintulich. The Administrator will cause
the share transfers to be allocated to the consortium of investors pro rata
according to their respective contributions of capital and hand them over to
the consortium of investors on the Operation Date."
I certify that this and the preceding pages are a true copy of the Ex Tempore Reasons for Decision of Justice Branson.
Associate:
Dated:
Counsel for the Applicant : Mr J Wilkinson
with Mr J Clarke
Solicitors for the Applicant: Cowell Clarke
Hearing Dates : 13 and 16 October 1995
