FEDERAL COURT OF AUSTRALIA Pleash, in the matter of Van Eyk Investments Pty Limited (Subject to Deed of Company Arrangement) [2012] FCA 1125 Citation: Pleash, in the matter of Van Eyk Investments Pty Limited (Subject to Deed of Company Arrangement) [2012] FCA 1125 Parties: BLAIR ALEXANDER PLEASH AND RICHARD ALBARRAN AS DEED ADMINISTRATORS OF VAN EYK INVESTMENTS PTY LTD ACN 078 974 197 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) File number: NSD 997 of 2012 Judge: EMMETT J Date of judgment: 17 August 2012 Legislation: Bankruptcy Act 1966 (Cth) Corporations Act 2001 (Cth) ss 437C, 444A, 444B, 447A, Part 5.3A Cases cited: Australasian Memory Pty Limited v Brien (2000) 200 CLR 270 Date of hearing: 17 August 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 11 Counsel for the plaintiffs: DR Stack Solicitor for the plaintiffs: Hynes Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 997 of 2012 IN THE MATTER OF VAN EYK INVESTMENTS PTY LTD BETWEEN: BLAIR ALEXANDER PLEASH AND RICHARD ALBARRAN AS DEED ADMINISTRATORS OF VAN EYK INVESTMENTS PTY LTD ACN 078 974 197 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) JUDGE: EMMETT J DATE OF ORDER: 17 AUGUST 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 447A of the Corporations Act 2001 (Cth) (the Act), that Part 5.3A of the Act is to operate in relation to Van Eyk Investments Pty Limited as if the reference to 15 business days after the end of the meeting of creditors in s 444B(2)(a) of the Act were a reference to 27 May 2009. 2. The plaintiffs lodge a copy of these orders with Australian Securities and Investments Commission. 3. The plaintiffs give notice of these orders to all persons identified in section E of the amended originating process, filed on 17 August 2012. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 997 of 2012 IN THE MATTER OF VAN EYK INVESTMENTS PTY LTD BETWEEN: BLAIR ALEXANDER PLEASH AND RICHARD ALBARRAN AS DEED ADMINISTRATORS OF VAN EYK INVESTMENTS PTY LTD ACN 078 974 197 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) JUDGE: EMMETT J DATE: 17 AUGUST 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By the present proceeding, relief is claimed in relation to the affairs of Van Eyk Investments Pty Limited (the Company). The proceeding is prompted by the operation of Part 5.3A of the Corporations Act 2001 (Cth) (the Act) in relation to the affairs of the Company. The Company was incorporated on 19 June 1997. Its only directors and shareholders were Mr Jan Van Eyk and his wife, Mrs Christine Van Eyk (the Van Eyks). By December 2008, the business of the Company was the operation of four butcher shops in the Brisbane area. However, on 12 January 2009, the Company was placed into voluntary administration and the present plaintiffs, Blair Pleash and Richard Albarran (the Administrators) were appointed as administrators of the Company. 2 Between 12 January 2009 and 22 April 2009, the Van Eyks proposed a deed of company arrangement for the consideration of the creditors of the Company. The proposal involved the return of control of the Company to the Van Eyks and the payment over a period of three years of the sum of $500,000 for the benefit of the creditors of the Company. The Van Eyks were to guarantee those payments and the obligation to make the payments was to be secured by mortgages over real property in Queensland owned by Mr Van Eyk. On 22 April 2009, the creditors of the Company passed a resolution that the Company execute the proposed deed of company arrangement. The Administrators sent a form of deed of company arrangement to the Van Eyks for execution on 8 May 2009. On 12 May 2009, the Van Eyks executed the deed of company arrangement as guarantors. The form of the deed indicated that it was made between the Company, the Administrators and the Van Eyks. The attestation page provided for execution on behalf of the Company and by the Administrators and the Van Eyks. 3 While the Van Eyks signed the deed in their capacity as guarantors, the deed was not signed on behalf of the Company or by the Administrators until 26 May 2009. That did not comply with s 444B(2)(a) of the Act. Section 444A(2) of the Act provides that the administrator of the company is to be the administrator of the deed, unless the creditors, by resolution passed at the meeting resolving that the company execute a deed of company arrangement, appoint someone else to be the administrator of the deed. Under s 444A(3), the administrator must prepare an instrument setting out the terms of the deed. Section 444A(4) provides that the instrument must specify certain matters. The instrument is taken to include those matters, except in so far as it provides otherwise. Once an instrument has been prepared under s 444A, the company must execute the instrument within 15 business days after the end of the meeting of creditors that resolves that the company execute the deed of company arrangement. 4 However, it may be executed within such further period as the Court allows on an application made within those 15 business days. Section 444B(3) provides that the board of the company may, by resolution, authorise the instrument to be executed by or on behalf of the company. That provision has effect despite the operation of s 437C, which provides that: While a company is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer or provisional liquidator of the company. 5 Section 444B(5) provides: The proposed administrator of the deed must execute the instrument before, or as soon as practicable after, the company executes it. 6 It is apparent, from what I have said, that s 444B was not complied with. However, that oversight was not discovered until recently. Under the deed of company arrangement, the day-to-day control of the Company was to be returned to the Van Eyks and the Company was to pay the sum of $500,000 by way of 36 monthly instalments of $13,888.88. The mortgages contemplated by the deed of company arrangement were executed by Mr Van Eyk on 29 May 2009. From then, the Van Eyks controlled the day-to- day affairs of the Company and, from May 2009 to February 2010, monthly payments were made in accordance with the deed of company arrangement. However, the payment due on 15 February 2010 was not made; rather, a payment of the sum of $10,623.67 was made. No further payments were made after that. Accordingly, on 8 April 2010, the deed administrators gave notice of default. At a meeting of the creditors of the Company, held on 29 July 2010, the creditors voted to terminate the deed of company arrangement and place the Company into liquidation. The Administrators were appointed as liquidators. 7 On 9 September 2010, the Administrators commenced proceedings in the Supreme Court of Queensland against the Van Eyks and, on 22 December 2011, judgment was entered in that proceeding against the Van Eyks in the sum of $428,029. On 25 January 2012, sequestration orders were made under the Bankruptcy Act 1966 (Cth) in respect of the estates of the Van Eyks. Shortly after 30 May, the Administrators became aware of the oversight in relation to the execution of the deed of company arrangement. This proceeding has been brought in order to seek relief in respect of the possible consequences of the failure to comply with s 444B of the Act. In the meantime, clearly enough, significant steps have been taken on the assumption that the deed of company arrangement was effective. Under s 444B(6), a deed of company arrangement becomes effective when it is executed by both the company and the proposed administrator. 8 The properties that were the subject of the mortgages have been sold and the solicitors for the Administrators currently hold approximately $520,000 in their trust account, representing the proceeds of sale. Those moneys are available for distribution to the creditors of the Company, on the terms of the deed of company arrangement, on the assumption that the deed of company arrangement is effective. The Administrators have taken all of the steps required by the Act by way of reporting to creditors and administering the deed of company arrangement on the basis that the instrument was effective as a deed of company arrangement. As I have said, the mortgages were given as contemplated by the deed of company arrangement. Clearly, the Van Eyks, being the only persons who were interested in the Company, desired that the deed of company arrangement be effective as such. 9 Notice of this application has been given to the creditors of the Company under the deed of company arrangement and to the Van Eyks, as well as to the Australian Securities and Investments Commission. None have indicated any desire to be heard in opposition to the relief now sought. In their amended application, the principal relief claimed is for an order under s 447A of the Act. Alternative relief is claimed if orders are not made under s 447A. 10 Section 447A(1) provides that the Court may make such order as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. Part 5.3A is concerned, generally, with the administration of a company's affairs with a view to executing a deed of company arrangement. Section 447A is an integral part of the legislative scheme provided for by Part 5.3A. It permits the making of orders that would alter how various provisions of Part 5.3A might apply to a particular company. The language of s 447A does not preclude the making of an order with future effect but in respect of past matters or events. Such an order would be an order about how Part 5.3A is to operate in relation to the subject company (see Australasian Memory Pty Limited v Brien (2000) 200 CLR 270 at [24] to [26]). There is no suggestion that, in the present case, any rights that might be adversely affected by an order under s 447A have accrued by reason of the failure to comply with s 444B. 11 In all of the circumstances, I consider that it is appropriate to accede to the application by the Administrators and to order that Part 5.3A of the Act is to operate in relation to the Company as if the reference to 15 business days after the end of the meeting of creditors in s 444B(2)(a) of the Act were a reference to 27 May 2009. The consequence will be that the deed of company arrangement executed by the Company on 26 May 2009 was executed in accordance with the requirements of s 444B(2)(a), as so modified. It would follow that the Administrators were the deed administrators with effect from 26 May 2009 and that the administration of the Company was extended up to that time. It would also follow that the Administrators were entitled to such costs, expenses and remuneration, incurred by them in their capacity as administrators of the Company from the time of their appointment on 12 January 2009 to 26 May 2009, as are payable under Part 5.3A of the Act. Their appointment as administrators of the deed of company arrangement continued from and after 26 May 2009 and they were entitled to such costs, expenses and remuneration, incurred by them in that capacity, as are payable under Part 5.3A of the Act. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 16 October 2012