FEDERAL COURT OF AUSTRALIA

Tasmanian Water & Sewerage Corporation Pty Ltd v Hayes [2015] FCA 506

THE COURT ORDERS THAT:

1.    Under s 447A of the Act, that s 445D(1)(g) of the Act apply to the second defendant subject to Orders 3 and 4 below.

2.    The Deed of Company Arrangement be terminated pursuant to s 445D(1)(g) of the Act.

3.    Notwithstanding the effect of clause 14 of the Deed of Company Arrangement, the claims of the plaintiff against the second defendant not be extinguished.

4.    As a condition of Order 2 above, that the plaintiff pay the first defendant’s remuneration and expenses as Deed Administrator of the second defendant, relating to insurance claims for the benefit of the plaintiff, in such amount as is agreed between the plaintiff and the first defendant or as approved by the Court pursuant to s 449E(1A)(c) of the Act, excluding the legal costs of this proceeding referred to in Order 5 below.

5.    Each party bear their own costs of this proceeding.

6.    Barry Kenneth Hamilton of Barry Hamilton & Associates of Level 1, 63 Salamanca Place Hobart, Tasmania be appointed as liquidator of the second defendant.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    An application was brought by the plaintiff, Tasmanian Water & Sewerage Corporation Pty Ltd (‘Tasmanian Water’), against the first defendant, Mr Alan Hayes. Mr Hayes was appointed Deed Administrator under a Deed of Company Arrangement (‘the DOCA’) entered into by the creditors of the second defendant, Aquagenics Pty Ltd (‘the Company’).

2    Tasmanian Water sought relief pursuant to ss 445D, 447A and 447E of the Corporations Act 2001 (Cth) (‘the Act’), on the basis of Mr Hayes’ failure to:

(a)    take steps to investigate the Company’s entitlement to make claims under certain professional indemnity insurance policies;

(b)    provide to Tasmanian Water information concerning the terms of those policies; and

(c)    procure the Company to commence proceedings against the insurers under the policies.

3    Tasmanian Water also sought:

(a)    relief on the basis that terms of the DOCA were prejudicial or unfairly discriminatory to the plaintiff; and

(b)    an order that the DOCA be amended or rectified so as to incorporate into it the effect of s 562 of the Act.

4    I had the advantage prior to the hearing of this application of reading and considering all the material before the Court, including the helpful submissions of the parties. When this matter was called on before me this morning, it became apparent through the discussion between the bench and counsel that the main issues were:

(a)    Tasmanian Water’s ability to pursue a cause of action against a particular insurer; and

(b)    Mr Hayes’ concerns about certain allegations made against him and the remuneration to which he would be entitled, having regard to the steps that he had undertaken in the course of administering the DOCA.

5    There has been a lengthy history of correspondence between the parties (which I do not need to rehearse), and through no fault of either party an impasse arose whereby the matter could not progress without the intervention of the Court. I have taken the view based upon the material that I have read prior to the hearing and following submissions made by Tasmanian Water, that there was no failure on the part of Mr Hayes that would warrant the intervention of the Court on the basis of the particular conduct as alleged by Tasmanian Water.

6    However, there is a proper basis for the seeking of relief by Tasmanian Water under s 445D(1)(g) of the Act. This is because the DOCA has been fully effectuated, save that the Company has potential claims against insurers, the sole beneficiary of which, under s 562 of the Act, is Tasmanian Water.

7    The impasse which arose between Tasmanian Water and Mr Hayes related to the provision of information relating to the Company’s insurance policies. That information, in my view, was required for Tasmanian Water to be in a position to know exactly how to proceed. Tasmanian Water acted reasonably in seeking such information. I note again, that I do not think that Mr Hayes acted in any way inappropriately in relation to his refusal to provide that information.

8    In the course of the hearing before me, Tasmanian Water and Mr Hayes agreed upon terms of orders which I consider appropriate to make, especially given that no other creditors have an interest in this proceeding and the Company insolvent.

9    The only remaining dispute between Tasmanian Water and Mr Hayes was in relation to the costs of this proceeding. Mr Hayes submitted that Tasmanian Water should pay his costs. Mr Hayes submitted that had Tasmanian Water provided a requested indemnity in exchange for the provision of the insurance documentation, the proceeding could have been avoided or resolved sooner. Whether or not Tasmanian Water was in a position to provide that indemnity, I do not consider Tasmanian Water should be effectively penalised by way of a costs order against it for its decision not to provide an indemnity. As I mentioned, I do not see any party as being at fault in this proceeding. In the circumstances, it is appropriate that each party to bear their own costs of the proceedings.

10    On the application of Tasmanian Water, the Company is to be wound up and I appoint Mr Barry Kenneth Hamilton of Barry Hamilton & Associates as liquidator of the Company.

11    I will therefore order that:

(1)    Under s 447A of the Act, that s 445D(1)(g) of the Act apply to the second defendant subject to Orders 3 and 4 below.

(2)    The Deed of Company Arrangement be terminated pursuant to s 445D(1)(g) of the Act.

(3)    Notwithstanding the effect of clause 14 of the Deed of Company Arrangement, the claims of the plaintiff against the second defendant not be extinguished.

(4)    As a condition of Order 2 above, that the plaintiff pay the first defendant’s remuneration and expenses as Deed Administrator of the second defendant, relating to insurance claims for the benefit of the plaintiff, in such amount as is agreed between the plaintiff and the first defendant or as approved by the Court pursuant to s 449E(1A)(c) of the Act, excluding the legal costs of this proceeding referred to in Order 5 below.

(5)    Each party bear their own costs of this proceeding.

(6)    Barry Kenneth Hamilton of Barry Hamilton & Associates of Level 1, 63 Salamanca Place Hobart, Tasmania be appointed as liquidator of the second defendant.

Associate:

Dated:    22 May 2015