Troha, Andrew v Cheb Pty Ltd [1996] FCA 298

IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No NG 3682 of 1995 ) GENERAL DIVISION ) BETWEEN: ANDREW TROHA Applicant AND: CHEB PTY LIMITED Respondent Coram:Davies J. Date: 30 January 1996 Place: Sydney MINUTES OF ORDER THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondent's costs of the application. NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No NG 3682 of 1995 ) GENERAL DIVISION ) BETWEEN: ANDREW TROHA Applicant AND: CHEB PTY LIMITED Respondent Coram:Davies J. Date: 30 January 1996 Place: Sydney REASONS FOR JUDGMENT This application seeks an order adjourning the second creditors' meeting, fixed for 2 February 1996, of a company under administration. The history of the events shows that the applicant, Mr Andrew Troha, served a statutory demand claiming $50,000 upon the respondent company, Cheb Pty Ltd ("Cheb"), late in 1995. The statutory demand was not answered and, on 4 December 1995, Mr Troha instituted proceedings in this Court for the winding up of Cheb in insolvency. It appears from the documents lodged that Mr Troha intended to rely upon the failure to comply with the statutory demand as raising a presumption of insolvency.

On 29 December 1995, an administrator of Cheb was appointed. The administrator was Mr W.J. Hamilton. Mr Fiorentino was also appointed as a joint administrator. The first meeting of creditors was held on 8 January 1996. At that meeting, Mr Troha attended as a creditor and was informed by Mr Hamilton that his debt would not be accepted for the purposes of the meeting as the debt did not appear in the current accounts of the company. In the result, Mr Troha and his representatives left the creditors' meeting. A resolution put to the meeting for the removal of the administrators and for the appointment of Mr H.J. Wiley as administrator was rejected. The application for winding up is set down for 22 February 1996. The applicant, Mr Troha, fears that the administrators will put to the second meeting of creditors a recommendation that Cheb be wound up and that, if that occurs, and the creditors so resolve, s.446A of the Corporations Law will operate with the result that Cheb will be deemed to have passed a special resolution that it be wound up voluntarily and be deemed to have nominated the administrators of the company as the liquidators. The present application was argued in a number of ways. First, an order was sought restraining the holding of the second creditors' meeting until 14 days after the determination of the applicant's petition for the winding up. It was put that such an order restraining the meeting should be made as a means of holding the subject matter of the application for winding up for, it was said, the passing of a resolution for winding up at the meeting of creditors on 2 February 1996 would frustrate Mr Troha's application to wind up the company and his present entitlement to seek the appointment of Mr H.J. Wiley as liquidator. It was further put, in reliance on s.447B(2) of the Corporations Law, that an order was necessary to protect the interests of Mr Troha as a creditor while the company was under administration for, it was said, Mr Troha's interests were not adequately protected. Reliance was also placed upon s.447A of the Corporations Law, which empowers the Court to make such orders it thinks appropriate about how Part V of the Law is to operate in relation to a particular company. There may well be other powers which could be relevant, such as the powers conferred upon the Court by ss.447B and 447E of the Corporations Law. However, the Corporations Law has instituted a new system of external administration giving great powers to creditors and administrators, imposing strict time limits within which administration should be conducted and laying down a clear regime for administrators to follow. In my view, a court should not interfere with the ordinary course of an administration unless there is some matter raised before it which shows that, in some way, the administration is not proceeding as Parliament intended, eg., that there is improper conduct on the part of an administrator or wrongful decision making on the part of an administrator which is prejudicing a creditor or creditors. In the present case, no ruling of the administrator has been challenged. The ruling of the administrator at the first creditors' meeting has not been challenged, as it could have been. Any such challenge should have been brought within 14 days as the regulations require. Nor does the material before the Court on its face show any prima facie impropriety or wrongful action on the part of the administrator. It merely shows that the administrator ruled, for the purposes of the first meeting of creditors, that Mr Troha was not a creditor, which appears to have been a view which was open to the administrator to take. Mr Durston, counsel for the applicant, specifically stated that he was not alleging impropriety. It seems to me that no such impropriety has been established. No impropriety should be inferred from the mere fact that the administrator ruled upon a proof which was before him and on which he had to rule for the purposes of the voting at that meeting. I cannot conclude from the material before the Court that there is anything which is likely to occur on 2 February 1996 which ought not to occur if the creditors who vote choose to resolve that the company should be wound up. In the absence of evidence of some wrongful action, it seems to me that I ought not to interfere with the ordinary course of the administration and therefore that the meeting of creditors which has been fixed for 2 February 1996 should go ahead. In the course of the argument, it was put that there were benefits to Mr Troha if his application for winding up were to proceed. It was put, firstly, that there would be a presumption of the existence of the debt. That presumption would arise as the Corporations Law does not permit a company to challenge in winding up proceedings a matter which could have been raised in the proceedings which the Corporations Law prescribes for dealing with statutory demands and which was not so raised. So, in the application to wind up, unless leave were to be given by the Court, the case would proceed on the presumption that the debt existed. It was also put in argument that Mr Troha would obtain the benefits of an estoppel as to his debt and the amount thereof if his petition succeeded. I have no firm view about that matter, but presently it seems to me that the issue of many windings up is insolvency, rather than the amount of the petitioner's debt. I do not presently accept that an order for a winding up, based upon non-compliance with a statutory demand, would necessarily bind the company and the liquidator to the amount of the debt claimed in the statutory demand. My general view is that, if it be to Mr Troha's advantage that the petition proceed because that would give Mr Troha some technical advantage, whether it be a presumption or whether it be an issue estoppel, then that is not a matter on which I should act at the present time. It seems to me to be in the interests of creditors generally that, if there be an issue as to Mr Troha's debt, that issue is one which should be dealt with in the ordinary way, namely by way of proof of debt, a ruling on the proof of debt and, if the ruling be adverse, a challenge to that ruling. The application will therefore be dismissed with costs. I shall order that the applicant pay the respondent's costs of the application. I certify that this and the 5 preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Davies. Associate: Date: 30 January 1996 Counsel for the applicant: D.J. Durston Solicitors for the applicant: Greg Morahan & Co. Counsel for the respondent: J.A. Hamilton (Solicitor) Solicitors for the respondent: Baker & McKenzie Date of hearing: 30 January 1996 Date of judgment: 30 January 1996