FEDERAL COURT OF AUSTRALIA

Emu Brewery Mezzanine Ltd, In the matter of Emu Brewery Mezzanine Ltd (in liquidation) [2009] FCA 1213 

CORPORATIONS – liquidator’s – compromise of debt – continuation of proceedings further delay distribution to creditors – financial hardship and distress for creditors – immediate distribution ordered.

MARTIN BRUCE JONES AND DARREN GORDON WEAVER (IN THEIR CAPACITY AS LIQUIDATORS OF EMU BREWERY MEZZANINE LIMITED (ACN 104 639 410 (IN LIQUIDATION) v EMU BREWERY DEVELOPMENTS PTY LIMITED (ACN 103 133 848) (IN LIQUIDATION) AS TRUSTEE FOR THE EMU BREWERY DEVELOPMENTS TRUST

WAD 73 of 2008

GILMOUR J

27 OCTOBER 2009

PERTH

IN THE MATTER OF EMU BREWERY MEZZANINE LIMITED (IN LIQUIDATION) (ACN 104 639 410)

THE COURT ORDERS THAT:

1.         The plaintiffs pay the defendant in accordance with the Deed of Settlement and Release entered into on 13 October 2009, and thereafter proceed to make the distribution to unsecured creditors of Emu Brewery Mezzanine Limited in accordance with the plaintiffs’ Notice of Intention to Declare a Second Dividend dated 4 March 2008.

2.         The necessity for the plaintiffs to publish a further notice of their intention to declare a dividend be dispensed with.

3.         The costs of the plaintiffs be costs in the liquidation of Emu Brewery Mezzanine Limited.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE MATTER OF EMU BREWERY MEZZANINE LIMITED (IN LIQUIDATION) (ACN 104 639 410)

REASONS FOR JUDGMENT

1                     The plaintiffs are the joint and several liquidators of Emu Brewery Mezzanine Limited (EBM).  They applied in April 2008 for an order that they proceed to make the distribution of funds to EBM’s unsecured creditors in accordance with a Notice of Intention to Declare a Second Dividend (Notice) dated 4 March 2008.  The Notice had been given to EBM’sMembers, Creditors and Noteholders. 

2                     The application was supported originally by the affidavit of Martin Bruce Jones, one of EBM’s joint liquidators, sworn 18 April 2008 and most recently by his further affidavit sworn 14 October 2009.

3                     From the date of issue of the Notice the only person who has objected to the declaration and distribution of the intended second dividend has been the defendant, Emu Brewery Developments Pty Ltd (EBD).

4                     EBD claims that EBM is not entitled to make a distribution to its creditors, as proposed, because EBD is entitled to the money which is to be distributed.  The total amount of EBD’s claim is $12,492,370.  This slightly exceeds the funds held by EBM.

5                     However a settlement has been agreed between EBM and EBD.  The terms of settlement are set out in a Deed of Settlement and Release (Settlement Deed) entered into between the parties dated 13 October 2009 by which EBM has agreed to pay EBD $1.5 million in compromise of its claim.  A significant part of this will go to payment of EBD’s legal and other costs.

6                     The defendant earlier made an application for an order that its reasonable costs and expenses be paid from the fund from which the joint liquidators propose to make a distribution to creditors.  If that application were to have proceeded and an order was made in those terms, the legal costs incurred by both parties would, it seems, be significant and possibly in the order of hundreds of thousands of dollars.

7                     Additionally, the continuation of the proceedings would extend even further the already lengthydelay in making the distribution to creditors.  The delay has caused, and is continuing to cause, considerable economic hardship and emotional distress for creditors.  A significant number of the creditors are “mums and dads” investors, many of whom are retired. 

8                     Mr Jones and his staff have received many telephone calls from creditors advising that they are desperate for the second dividend to be distributed as a matter of urgency.  Sandhurst Trustees Limited, the trustee for the Mezzanine Note Holders appointed under the Mezzanine Note Trust Deed, has received telephone calls and letters from Mezzanine Note Holders concerning the distress and financial hardship being endured by those callers and writers. 

9                     The plaintiffs do not consider that the defendant has a strong case.  However the prospect of it succeeding cannot be dismissed.  The plaintiffs have been advised by senior counsel that the settlement is, in all the circumstances, reasonable.

10                  The effect of the Settlement Deed is that, upon the distribution of the second dividend, the creditors of EBM will have received an overall dividend of 95.3 cents in the dollar in respect of their principal investment, inclusive of the interim dividend, which represents 59 cents in the dollar in respect of their principal investment, already paid to creditors on 15 November 2007.

11                  In the event that the proceedings continue and the defendant succeeds in its claim, there will be no further funds available for the liquidators to distribute, and the creditors will therefore not receive any further dividend. 

12                  Accordingly, the joint liquidators believe that it is in the best interests of EBM to settle the claim made by EBD on the terms set out in the Settlement Deed which will enable them to proceed without delay to distribute a second dividend to unsecured creditors.  I am satisfied that, in these circumstances, the requirement imposed on the plaintiffs by Regulation 5.6.69 of the Corporations Regulations 2001 (Cth) to publish a further notice of intention to make a distribution ought be dispensed with.  The requirement to publish a further notice of such intention to distribute a second dividend would delay the distribution by at least a further 28 days.

13                  There will be orders as sought.

Associate:

Dated:         27 October 2009