Telaro Pty Ltd v Burns & Ors [2000] NSWSC 26

New South Wales Supreme Court

CITATION : Telaro Pty Ltd v Burns & Ors [2000] NSWSC 26 CURRENT JURISDICTION: Supreme Court FILE NUMBER(S) : SC 3394/99 HEARING DATE(S) : 4 February 2000 JUDGMENT DATE : 4 February 2000

PARTIES : Telaro Pty td v Graeme Albert Burns & Ors JUDGMENT OF : Brownie AJ at 1

LOWER COURT Supreme Court JURISDICTION : LOWER COURT FILE NUMBER(S) : LOWER COURT JUDICIAL OFFICER :

COUNSEL : Mr J M Ireland QC for plaintiff Mr C A Vindin for defendants SOLICITORS : McGirr James Hall & Associates for plaintiff S A Teen for defendants CATCHWORDS : Corporations - administration - whether the lessor of a company under administration needs leave to continue existing proceedings for possession of land occupied by company - Corporations - administration - about s435A of Corporations Law should be applied LEGISLATION CITED : Corporations Law Pt 5.3A CASES CITED : Re Java 452 Pty Ltd Permanent Trustees Australia Limited v Stout (1999) 32 ACSR 507 DECISION : Declaration & order sought in paras (3) and (4) of summons; dismiss claim for relief in para (5). Plaintiff to have costs up to 10am 4 February 2000 except for para 5 costs; defendant to have costs of para (5) and the last five hours. Short minutes may be brought in.

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

BROWNIE AJ

Friday 4 February 2000

3394/99: TELARO PTY. LIMITED v GRAEME ALBERT AUSTEN BURNS &ORS JUDGMENT

1 HIS HONOUR : The plaintiff is the registered proprietor of certain lands at Granville. The third defendant is the tenant of a part of that property, known as Unit 2. 2 On 6 December 1999 the plaintiff sold the property at auction. The contract of sale requires the plaintiff to give vacant possession of unit 2 and to complete the sale within 42 days. 3 On 14 December 1999 the plaintiff gave notice to quit to the third defendant. That notice required vacation within a month, it being the plaintiff's contention that the third defendant was a tenant from month to month. 4 On 22 December the then solicitor for the third defendant wrote to the plaintiff's solicitors asserting the existence of a longer lease and on 24 December the plaintiff commenced these proceedings. 5 So far as concerns the third defendant, the plaintiff seeks a declaration that the third defendant holds unit 2 as tenant from month to month only, an injunction restraining the third defendant from lodging a caveat asserting a greater term of the tenancy, and judgment for possession of unit 2. 6 On 7 January 2000 an administrator under Part 5.3 A of the Corporations Law was appointed to the third defendant. Two meetings of creditors have since been held but no precise proposal has yet emerged concerning the future affairs of the third defendant. 7 In the meantime the purchasers of the property have given to the plaintiff a notice to complete requiring completion by 9 February 2000 and threatening to terminate the contract if completion does not occur by that date. For the moment the plaintiff is unable to complete because it cannot give vacant possession of unit 2. 8 Earlier the third defendant claimed to have a lease other than a lease from month to month. That claim is no longer pressed but the third defendant resists the plaintiff's claim for judgment for possession. 9 The first issue for resolution now is whether section 440 C of the Corporations Law prevents the plaintiff from proceeding without the leave of the Court. That section provides relevantly that during the administration of a Company the owner or lessor of property that is occupied by, or is in the possession of the Company cannot take possession of the Company or otherwise recover it except with the leave of the Court. 10 The plaintiff contends that section 440 C does not apply because of the operation of section 441 F. 441 F provides relevantly that if before the beginning of the administration of a company a person such as the plaintiff exercises any power in relation to that property, for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it, then section 440 C does not prevent the plaintiff from exercising that power in relation to the property. 11 The plaintiff's contention in brief is that either when it served the notice to quit or when it commenced the present proceedings for possession of the land, or when it did those two things in combination, it was exercising a power in relation to the property for the purpose of enforcing a right held by the plaintiff as owner or lessor to take possession of the property or otherwise recover it. 12 At common law the plaintiff had no right to take possession of the property before the expiry of the notice to quit so that, it seems to me, the plaintiff can only now rely upon so much of section 441 F as speaks of otherwise recovering the property. 13 The third defendant submits (and I accept) that the claim for possession of land, contained in paragraph 5 of the summons, was premature as at the date of the filing of the summons. However, the other claims made in paragraphs 3 and 4 of the summons for the declaration and the injunction that I have mentioned were properly brought, given the circumstances that prevailed as at 24 December 1999. 14 The question is apparently free from authority. Reading Part 5.3 A, and more particularly Divisions 6 and 7, I have come to the view that what the plaintiff did in giving a notice to quit and then in commencing an action for possession of land did not amount to the exercising of a power for the purpose mentioned. 15 It seems to me that the word "power" is not apt to describe what the plaintiff did. This conclusion seems to be reinforced by a consideration of the provisions of Part 5.3 A overall, particularly when one reads section 435 A, which provides that the object of Part 5.3 A is to provide for the business, property and affairs of an insolvent company to be administered in a way that (a) maximises the chances of the Company or as much of its business continue in existence, or (b) , if it is not possible for the Company or its business to continue in existence, results in a better return for the Company's creditors and members than would result from an immediate winding-up of the Company. 16 I therefore hold that section 441 F does not operate to take this case outside the scope of section 440 C and that the plaintiff requires the leave of the Court to proceed further if it is to recover the judgment for possession that it seeks. 17 The plaintiff seeks that leave now, and I turn to that question. As tothe circumstances relied upon as going to the exercise of the discretion conferred by section 440 C, Mr Vardy, an accountant employed by the firm of which the administrator of the third defendant is a partner, has sworn an affidavit in which he states the following. "6. The business appears to have developed substantial goodwill which may well be highly saleable in conjunction with its fittings, plant and equipment and stock-in-trade. Since the commencement of the administration, the business has continued to trade on a day to day basis. There has been a positive cash flow. This is consistent with the administrator's view (pages 9 and 10 of annexure "A") that but for the reasons stated therein the third defendant was trading and solvent. This continued trading is essential to maximise the return to creditors whether by means of a deed of company arrangement or a sale of the business as a going concern. These are the principal objects of the voluntary administration procedure.