FEDERAL COURT OF AUSTRALIA

Lindholm, in the matter of Munday Group Pty Limited (Receivers and Managers Appointed) (In Liquidation) v Tsourlinis Distributors Pty Ltd

[2010] FCA 1488

IN THE MATTER OF MUNDAY GROUP PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE)

THE COURT ORDERS THAT:

1.    John Ross Lindholm and Peter Damien McCluskey (the “deed administrators”) have leave, jointly or severally, to transfer all of the shares in Taylor McKay Pty Ltd (subject to deed of company arrangement) (receivers and managers appointed) (ACN 118 950 244) to Walson Group Pty Ltd ACN 115 597 254 or its nominee.

2.    The deed administrators’ costs of and incidental to their interlocutory process filed on 14 December 2010 be costs in the deed administration.

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 Federal Law Search on the Court’s website.

IN THE MATTER OF MUNDAY GROUP PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE)

REASONS FOR JUDGMENT

1    The deed administrators of Taylor McKay Pty Ltd (subject to deed of company arrangement) (receivers and managers appointed) (Taylor McKay), seek leave under s 444GA(1) of the Corporations Act 2001 (Cth) (Act) to transfer all the shares in Taylor McKay to the purchaser of the Whalers’ Inn hotel in Warrnambool under the sale agreement between the group of companies of which Taylor McKay is one, as vendor and Walson Group Pty Ltd as purchaser.

2    The Munday group comprises 17 companies. Each group company granted securities to the National Australia Bank. The Bank’s securities, once fully realised, will be insufficient to cover the debt owed to the Bank, and there will be a substantial shortfall.

3    Following a default under the security arrangements, in April 2010 the bank appointed receivers to all group companies. At about the same time the directors appointed administrators to take control of the companies’ affairs.

4    On 3 December 2010 the receivers entered into the sale agreement. By this agreement the receivers sold the units in the Taylor McKay Unit Trust, of which Taylor McKay Pty Ltd is the trustee. The principal asset of the trust is the Whalers’ Inn hotel. The sale agreement is conditional on the transfer to the purchaser of the shares in Taylor McKay. The sale agreement also requires Taylor McKay to execute a deed of company arrangement (DOCA), which will compromise creditors’ claims.

5    On 3 December 2010 the second meeting of creditors of Taylor McKay was held. The creditors resolved that a deed of company arrangement be executed. The deed provides for the establishment of a creditors’ trust and a trust fund of $20,000 for distribution among ordinary unsecured creditors in full satisfaction of their claims. The unsecured creditors then become beneficiaries of the trust fund (excluding the Bank, employees and the deed administrators, all of which will be paid directly by the Bank).

6    The deed administrators have considered alternative outcomes to creditors from completion of the sale agreement and DOCA, and liquidation. The comparison shows that in a winding up, unsecured creditors, both priority and ordinary, would receive nothing, whereas under the sale agreement and DOCA, priority creditors would be paid in full and ordinary unsecured creditors would receive 5 cents in the dollar.

Transfer of shares

7    Section 444GA(1) enables a deed administrator to transfer shares in the deed company if the deed administrator has obtained the consent of the shareholder or the leave of the Court. The Court may only give leave if it is satisfied that the transfer would not “unfairly prejudice” the interests of members of the company: s 444GA(3).

8    The shares in Taylor McKay are held by Ricky John Munday. He has not given his consent to a transfer, despite several requests to do so. A transfer of his shares is necessary in order to effect the sale transaction under the sale agreement and to produce the benefits to creditors under the DOCA.

9    The shares themselves have no economic value: Taylor McKay is insolvent, both on a cashflow test and on a balance sheet test. Mr Munday, as shareholder, will receive nothing in either a winding up or under the DOCA.

10    Although the shares have no economic value because the company’s debts far exceed the value of its assets, they do have some “tactical” value to Mr Munday. He could extract a payment for a transfer of the shares. The payment could not exceed the cost of an application by the deed administrators to be given the right to transfer the shares, assuming there is no risk of failure. That, “value” is not however, the kind of interest which s 444GA(3) is designed to protect. To the contrary, it is just the type of blackmail the section is designed to stop.

11    I will give the deed administrators leave to transfer Mr Munday’s shares in Taylor McKay.

Associate:

Dated:    31 January 2011

SCHEDULE OF PARTIES

JOHN LINDHOLM AND PETER MCCLUSKEY IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF MUNDAY GROUP PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 116 558 420) (and others according to the attached Schedule of First Plaintiffs)

First Plaintiffs

UPDAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

Second Plaintiff

JODAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

Third Plaintiff

HAMDAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

Fourth Plaintiff

AND

TSOURLINIS DISTRIBUTORS PTY LTD

First Defendant

CARLTON TOWERS PTY LTD

Second Defendant

GROSVENOR PROPERTY DEVELOPMENT PTY LTD

Third Defendant

SCHEDULE OF FIRST PLAINTIFFS