Owen, in the matter of Far Pavilions Interiors Pty Ltd (Administrators Appointed) [2016] FCA 1602

FEDERAL COURT OF AUSTRALIA

Owen, in the matter of Far Pavilions Interiors Pty Ltd (Administrators Appointed) [2016] FCA 1602 File number: QUD 581 of 2016

Judge: DOWSETT J

Date of judgment: 1 August 2016

Legislation: Corporations Act 2001 (Cth) s 447D Sale of Goods Act 1896 (Qld) s 21

Date of hearing: 1 August 2016

Registry: Queensland

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: No Catchwords

Number of paragraphs: 7

Counsel for the Plaintiffs: Mr P O'Higgins

Solicitor for the Plaintiffs: DibbsBarker

REASONS FOR JUDGMENT

QUD 581 of 2016 IN THE MATTER OF FAR PAVILIONS INTERIORS PTY LTD (ADMINISTRATORS APPOINTED) ACN 010 287 831 BETWEEN: MICHAEL ANDREW OWEN AND MARTIN FRANCIS FORD AS JOINT AND SEVERAL ADMINISTRATORS OF FAR PAVILIONS INTERIORS PTY LTD (ADMINISTRATORS APPOINTED) ACN 010 287 831 First Plaintiff

FAR PAVILIONS INTERIORS PTY LTD (ADMINISTRATORS APPOINTED) ACN 010 287 831 Second Plaintiff

DOWSETT J: 1 I propose to give very short reasons. The circumstances of this matter appear adequately and succinctly from the affidavit of Mr Michael Andrew Owen filed on 29 July 2016. Insofar as the present application concerns notification of the holding of a meeting and the holding of future meetings, it is not necessary that I say anything more than that the orders sought will facilitate the further administration of the affairs of the company, and minimize the cost involved in so doing. I see no reason why the advantages of technology ought not be employed in order to achieve such goals. 2 Concerning the matter of stock, I have had some reservations. The company is in the business of selling furniture and similar products. It seems that at the time at which it went into administration, various customers had paid to it amounts of money with respect to the purchase of individual items. Such items were generally held by the company at the time at which each purchase was effected, but in some circumstances, more than the number of items in stock were sold. The system required that, at the time of each sale, such sale be recorded, but there was no mechanism for identifying the particular item in stock attributed to that transaction. 3 Further, it was possible for the system of stock allocation, such as it was, to be overridden in certain circumstances. Those circumstances appear in Mr Owen's affidavit. In the administration, these arrangements have led to there being two categories of items held in stock against transactions with customers. Category A is stock held by the company in sufficient quantities to meet the recorded sales. It is submitted that pursuant to s 21, r 5 of the Sale of Goods Act 1896 (Qld) (the "Sale of Goods Act"), there has been an unconditional appropriation of individual stock items to individual contracts. 4 The second category is stock in respect of which, at the time of the commencement of the administration, fewer than the number of items sold were held, apparently as the result of the manual override to which I have referred. The administrator urges the view that in those circumstances, all of the relevant stock should be treated as belonging to the relevant customers as tenants in common. The difficulty I have with that proposition is that it seems to me that the basis upon which stock was allocated did not amount to an unconditional appropriation, as that term is used in r 5 of the Sale of Goods Act. It was an appropriation subject to the possibility of subsequent defeasance in the event that there was a manual override. That did not happen with respect to the stock in the first category, and so it seems to me that those purchasers have a rather stronger claim than do purchasers of the second category. Rule 5 has, over the more than a century and a half during which it has been in existence, provoked much litigation. There seems to be no reason why this case should be an exception. I accept that the amount of money involved is relatively small, and that the unsecured creditors, other than the purchasers, are unlikely to derive anything in any event. 5 It seems likely that a very large part of the value of these items would be consumed in the investigations needed on the part of the administrator in order to identify the strict legal position with respect to each purchaser. In those circumstances, from the point of view of the administrator and the purchasers, there is much to be said for the proposed orders which are, in effect, that items in the first category go to the relevant purchasers, that items in the second category be sold, and the net proceeds distributed to the relevant purchasers. However there is also the question of the interests of the other unsecured creditors. 6 Very few seem to have shown much interest in the administration, having regard to attendance at the first creditors' meeting. No doubt, many have accepted that they will get little or nothing by way of dividend in the administration. There is a secured creditor, but it has had notice of these proceedings, and has chosen not to appear. The other unsecured creditors have not been served. However they will become aware of these proceedings from the documents which will be available to them pursuant to the orders which I have just made. They will have an opportunity to apply, should they be so advised, with respect to those orders. 7 In the circumstances, and notwithstanding my doubts as to the way in which r 5 might be applied, the best interests of the unsecured creditors will be served by minimizing the money to be consumed in investigating and prosecuting the claims as between the company and its customers. In those circumstances, I am prepared to make appropriate directions in accordance with s 447D of the Corporations Act 2001 (Cth). I will adjourn the matter to enable the applicant to bring in appropriate forms of order. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.