Australian Winch and Haulage Company Pty Limited (Administrator Appointed) v Walter Construction Group Limited [2002] FCA 1188

FEDERAL COURT OF AUSTRALIA

Australian Winch and Haulage Company Pty Limited (Administrator Appointed) v Walter Construction Group Limited [2002] FCA 1188 AUSTRALIAN WINCH AND HAULAGE COMPANY PTY LIMITED (ADMINISTRATOR APPOINTED) v WALTER CONSTRUCTION GROUP LIMITED N 549 of 2002 ALLSOP J 23 SEPTEMBER 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 549 of 2002

BETWEEN: AUSTRALIAN WINCH AND HAULAGE COMPANY PTY LIMITED (ADMINISTRATOR APPOINTED)

APPLICANT

AND: WALTER CONSTRUCTION GROUP LIMITED

RESPONDENT

JUDGE: ALLSOP J

DATE OF ORDER: 23 SEPTEMBER 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. On the undertaking of the applicant company through its counsel and the undertaking of Mr Brian Hemsworth, shareholder of that company, in the form of Practice Note 3 and the undertaking by Mr Greene not to take any step in the administration which may be prejudicial to the respondent, the respondent by itself, its agents, servants or otherwise be restrained until 11 am 24 September 2002, from continuing with any call on unconditional undertakings to American Re-Insurance Company, copies of which are annexures "D1", "D2", "D3" and "D4" to the affidavit of Mr Chris Kintis sworn and filed 16 September 2002. 2. The applicant pay the respondent's costs of the hearing on 23 September 2002. 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 N 549 of 2002

BETWEEN: AUSTRALIAN WINCH AND HAULAGE COMPANY PTY LIMITED (ADMINISTRATOR APPOINTED)

APPLICANT

AND: WALTER CONSTRUCTION GROUP LIMITED

RESPONDENT

JUDGE: ALLSOP J

DATE: 23 SEPTEMBER 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On Friday, 20 September 2002, I delivered reasons orally for my view that the notice of motion brought by the applicant to restrain the respondent calling on four undertakings be dismissed. 2 The parties agreed inter partes that there would be no difficulty in the respondent not calling on the matter before noon today 23 September 2002. In those circumstances there was no undertaking as to damages because the matter was dealt with by agreement between the parties. Mr Finlay, solicitor for the respondent, was able to obtain instructions. 3 It is sought now to extend that further restraint by another twenty-four hours. The respondent does not consent to this extension. The applicant proffers an undertaking as to damages for that further time and for the period from Friday 20 September 2002. Mr Hemsworth, personally, has also given an undertaking as to damages and he proffers it from Friday as well. 4 It is said that the further time is needed to allow the applicant to make up its mind as to whether to seek leave to appeal. Though my revised reasons are not yet available, they will be available early this afternoon in a barely proofed form at least. I delivered my oral reasons tolerably slowly on Friday, taking some two hours, in order that, as was the case, the solicitors could keep up. 5 The applicant is in voluntary administration. It has secured creditors. There are a number of people whose views may affect the position. As I indicated on Friday, my views were substantially influenced by a number of matters. One was the view that I had as to the construction of the clauses, in particular in relation to the first $150,000. Another was my view that on the balance of convenience there was in effect no evidence before me of irreparable damage to the applicant. The third matter was my view informed by the lucid and comprehensive judgments of Brooking and Callaway JJA in particular in Bachmann Pty Ltd v BHP Power New Zealand Ltd [1999] 1 VR 420 and Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812, respectively, concerning the importance in commercial matters of this kind of giving effect to the commercial instruments the parties have entered, subject of course to any contractual rights that they have also undertaken in relation to the calling of those instruments. 6 In the light of the clear statements which I made in pars 18-19, in particular, of my judgment of 16 September 2002, the balance of convenience was of great importance on Thursday and Friday. This was particularly so in the circumstance that the respondent had shown a fairly strong case for the satisfaction of cl 10.3, at least in respect of the insurance obligations. However, as will be seen from a reading of my reasons of 20 September when they are available, I qualified my views by saying that my reasons should not be taken, in effect, as a precedent where it could be shown that there could be irreparable damage to a party by reason of calling up the bonds. 7 I do not propose here to recapitulate or resummarise my reasons. My point in saying these things is that the balance of convenience was significant in my decision. I am very troubled by any extension of the agreement of the parties by an order. 8 Mr Greene will give, through his solicitor Mr Kintis, an undertaking that no step will be taken in the administration prejudicial to the position of the respondent. However, there is a secured creditor involved here who is apparently owed something in the order of $5 M. One of the significant matters that bore on my view on Friday was the uncertainty that the respondent faced pending a final resolution of this matter. It has an unconditional instrument which, on my view, it has not been shown should be interfered with. However, I am mindful of permitting the applicant the opportunity to seek leave to appeal if it so instructs its representatives. 9 In effect, what is said before me today is that the number of different parties involved has not permitted that decision to be made. However, the parties are, I am told, meeting this afternoon. If any application for leave to appeal is to be made, it should be made promptly. That is by tomorrow morning. The duty judge this week, Moore J, has been apprised of the possibility of this and can hear the matter or in his stead, Conti J, who is the corporations duty judge. But I think given the tenuous connection with s 1324 of the Corporations Act 2001 (Cth) that Moore J, as general duty judge, is the appropriate person before whom to make any such application. 10 Mr Hunt, counsel for the respondent, has submitted that I should not extend the order and, if I may say so with the greatest respect, his submissions have great force. However, I think in the light of the undertakings it may, perhaps, be said that there is little risk of injury to the respondent. My concern, however, is that though the bonds are unconditional and apparently supported by consideration, there may occur in this administration matters out of the control of the administrator. There is no evidence as yet before me that that may occur. 11 I am most reluctant to grant any further extension, however, my purpose on Friday was to enable an application for leave to appeal to be made. Mr Hunt says that the applicant can be accommodated because it can apply for an interlocutory mandatory order for the respondent to produce funds or repay the funds pending the appeal. I think there is a good deal of force in that. 12 Alternatively, an application can be made for the placement of the funds in a place for their protection that likewise will hold the position pending any application for leave to appeal. Although there was no evidence put before me as to the balance sheet of the respondent, there was no proposition put in argument that it was a company otherwise than of substance. However, I do not have precise evidence before me as to its financial state. 13 The question is a fine one I think. Ultimately my purpose on Friday in seeking the agreement of the parties was to hold the position pending an urgent application for leave to appeal. As I said, the question is a fine one, however on balance I propose, on the basis of the three undertakings of the applicant company, Mr Hemsworth and Mr Greene, to make an order in the same terms as I made on 16 September 2002 until 11 am tomorrow. 14 Any further order will be a matter for any judge hearing the leave application and without intending to confine or affect that judge's reasons or views, I will simply also add the following comments. If there is sufficient evidence as to a reasonable present financial state of the respondent, in my view, the appropriate way henceforth of dealing with these bonds is to permit the call to be made, and if a sufficiently appropriate case is made out for interlocutory relief of a mandatory nature, that should be applied for. 15 I say this in elaboration of my views of today and in elaboration of my views expressed on Friday 20 September as to the importance of giving effect to these kinds of commercial instruments in the circumstances of the present case. Those comments, as I said, are not intended to bind (as obviously they could not) the judge or judges hearing the application for leave. However, they are made to express and highlight the reluctance with which I make any order holding the position any further. 16 The cost of today's application should be paid for, in my view, by the applicant as part of the costs order that I made on Friday 20 September. 17 On the undertaking as to damages by the company, the undertaking as to damages by Mr Hemsworth, both from Friday, and the undertaking by Mr Greene not to take any step in the administration of this company which may prejudicially affect the respondent, those undertakings being given by those parties by and through Mr Kintis, I will make an order in the terms made on 16 September 2002 until 11 am on 24 September 2002. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.