New South Wales Supreme Court CITATION : J Aron Corporation v Newmont Yandal [2004] NSWSC 544 HEARING DATE(S) : 15, 18 June 2004 JUDGMENT DATE : 22 June 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Application for separate determination of questions denied in 2003 proceeding; application stood over in 2004 proceeding, until after close of pleadings, with appropriate directions CATCHWORDS : PRACTICE AND PROCEDURE - determination of separate questions - after unsuccessful application for determination of separate questions in proceeding to invalidate deed of company arrangement, plaintiffs take new proceeding seeking recovery of debt on basis that deed is ineffective - whether it is appropriate to make orders for determination of separate questions in new proceeding - whether order for determination of separate questions should be made in either proceeding, where questions are limited to exclude discretionary factors 4666/03 The J Aron Corporation and The Goldman Sachs Group Inc (P) Newmont Yandal Operations Pty Ltd (D1) Clynton Court Pty Ltd (Subject to a Deed of Company Arrangement) (D2) PARTIES : Mark Anthony Korda and Mark Francis Xavier Mentha (D3) Australian Metals Corporation Pty Ltd, Eagle Mining Pty Ltd, Great Central Holdings Pty Ltd, Great Central Investments Pty Ltd, Great Central Mines Pty Ltd, Hunter Resources Pty Ltd, Matlock Castellano Pty Ltd, Matlock Mining Pty Ltd, Newmont Wiluna Gold Pty Ltd, Newmond Wiluna Metals Pty Ltd, Newmond Wiluna Mines Pty Ltd, Quotidian No 117 Pty Ltd (D4) 2407/04 The J Aron Corporation and The Goldman Sachs Group Inc (P) Newmont Yandal Operations Pty Ltd (D) FILE NUMBER(S) : SC 4666/03, 2407/04 V R W Gray (P - both matters) COUNSEL : P R Whitford (D1, D4 - 4666/03, D - 2407/04) J Beach QC with R A Dick (D2, D3 - 4666/03) Abbott Tout (P - both matters) SOLICITORS : Arnold Block Leibler (D1, D4 - 4666/03, D - 2407/04) Gadens Lawyers (D2, D3 - 4666/03) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J TUESDAY 22 JUNE 2004 4666/03 THE J ARON CORPORATION & ANOR V NEWMONT YANDAL OPERATIONS PTY LTD 4207/04 THE J ARON CORPORATION & ANOR V NEWMONT YANDAL OPERATIONS PTY LTD JUDGMENT 1 HIS HONOUR: These reasons for judgment follow on from two earlier judgments. The first, [2004] NSWSC 159 (12 March 2004), denied an application by the plaintiffs in proceeding No 4666 of 2003 (a proceeding challenging the validity of the principal deed of company arrangement, in which there are multiple defendants) for an order for separate determination of certain questions. The questions had been designed so as to permit speedy determination of the plaintiffs' "formal defect" argument, which seeks to establish that the principal deed has been terminated. The second judgment ([2004] NSWSC 543 (31 May 2004)), delivered after the plaintiffs had commenced a separate action against only Newmont Yandal (No 2407 of 2004) for recovery of their alleged debt, did no more than express some provisional views of mine for the purpose of case management of the two proceedings - specifically whether the court should intervene to prevent the second proceeding from going forward into pleadings when there was a prospect that the pleadings would raise the same issues as in the first proceeding. 2 The basic facts and descriptions of the two proceedings are set out in the earlier judgments and I shall not repeat them. The earlier application for orders for separate determination of questions was opposed by all defendants. I decided to deny the application for reasons which may be summarised briefly as follows: (1) either there is no deed of company arrangement for the purposes of Part 5.3A of the Corporations Act, or deeds of company arrangement have been executed to which Part 5.3A applies, but those deeds are arguably defective in ways entitling the plaintiffs to apply for relief under the statute; (2) if there is no deed of company arrangement for the purposes of Part 5.3A, but only an instrument inter partes, then (a) the plaintiffs, claiming to be creditors of Newmont Yandal, are not entitled to seek determination of a separate question concerning the proper construction of the instrument, because they are not parties to it; (b) even if the plaintiffs, as non-parties to the principal deed, were entitled to ascertain the proper construction of the instrument, it would be inappropriate to decide that question in the 2003 proceeding as presently constituted, because the decision would affect persons not parties to the proceeding, namely Newmont Australia (a party to the principal deed) and other unsecured creditors of Newmont Yandal; (c) a determination, in favour of the plaintiffs, of the separate questions which were then proposed would not lead to a judgment disposing of the 2003 proceeding, because the deeds of company arrangement have been performed, employees and trade creditors have been paid, and complex questions would remain as to the appropriate orders in light of performance of the deeds; (3) if the principal deed took effect under Part 5.3A (whether or not any formal defect exists), then (a) the rights of the plaintiffs are those rights conferred by Part 5.3A and other parts of the Corporations Act; (b) if the plaintiffs make any application in reliance on their statutory rights to do so (such as ss 445G, 447A or 1322), the statutory provisions give the court substantial discretion; (c) the exercise of the court's discretion depends upon an understanding of all relevant facts and circumstances; (d) therefore, in order to persuade the court to grant relief under such statutory provisions, it would be necessary to enter into proof of the whole or a substantial part of the facts that would be at issue in the final hearing, and little or nothing would be gained by having those matters considered in the context of a determination of separate questions. 3 The second judgment was given after the plaintiffs had commenced the 2004 proceeding, in which they seek to recover the whole of the debt they claim to be owed by Newmont Yandal, without recognising any reduction by virtue of the principal deed. At the return date for the new proceeding, counsel for the Newmont companies contended that it would be pointless to allow the new proceeding to continue independently of the 2003 proceeding, because the pleadings would inevitably give rise to the issue whether the principal deed was effective to reduce Newmont Yandal's debt - that is, the "formal defect" argument would inevitably be raised by both proceedings. 4 Counsel for the plaintiffs informed the court that his instructions were to seek leave to amend the statement of claim in the 2003 proceeding so as to remove the "formal defect" argument and avoid the duplication. He submitted that, according to his clients' contention, the court had no jurisdiction to exercise its powers under ss 445G, 447A and 1322, and he said that the court should allow the defendant to put on its defence and any cross-claim and then consider what directions should be made. 5 I invited the plaintiffs to provide some written submissions with respect to the contention that the court would have no jurisdiction under these provisions, so I could assess whether there is sufficient substance in those contentions that the court should not intervene to consolidate or summarily dismiss the new proceeding. Having received written submissions from the plaintiffs, and Newmont Yandal, I formed the provisional view that there was a sufficiently arguable case for the plaintiffs' position, that the court should not, at this stage, prevent the 2004 proceeding from "evolving" through the filing of pleadings. 6 Both proceedings were before me on 15 June for directions. Counsel for the Newmont companies informed me that in the circumstances, his clients would consent to orders for the separate determination of questions, drafted so as to exclude discretionary matters. The newly drafted questions could be determined, he said, in the 2003 proceeding, or alternatively in the 2004 proceeding, provided in the latter case that pleadings were filed and all the parties in the 2003 proceeding were joined as defendants. Senior counsel appeared for the second and third defendants (the administration company and the deed administrators), and informed me that his clients opposed the determination of separate questions. I gave directions for the preparation of the proposed new questions and brought the matter back before me on 18 June. 7 On 18 June, the second and third defendants were again represented, and after discussion it appeared to me that substantial agreement would be reached as to the text of the proposed questions. I attach, as an appendix to these reasons for judgment, the text of what I take to be the questions in their agreed form. The issue that remains is whether, in the different circumstances now confronting the court, it is appropriate to make orders for the separate determination of questions, notwithstanding my earlier refusal to do so. 8 What has changed since my decision of 12 March 2004 is that the 2004 proceeding has been filed, and both parties to the new proceeding as presently constituted consent to orders for the separate determination of questions, although the second and third defendants in the 2003 proceeding oppose such orders. The question is whether these new circumstances affect the reasoning in my judgment of 12 March 2004 sufficiently to justify my making orders for the separate determination of questions in one or other of the proceedings. 9 As far as the 2003 proceeding is concerned, the most important difference in the present application is that the questions have been designed to exclude the discretionary component of ss 445G, 447A and 1322. Therefore, in terms of the summary of my earlier reasoning set out above, the concerns articulated in paragraph (3) are no longer present. But other problems remain. If I were to accept the plaintiffs' contentions that the principal deed is defective, and that the court has no jurisdiction to exercise any of its discretions to cure the defect, difficult questions would remain as to the appropriate orders to be made in light of the substantial performance of the deed. Therefore the certainty of outcome that courts usually expect before embarking upon the separate determination of questions would not be present. The issue of the plaintiffs' standing might be overcome if I were to find that their rights were governed by Part 5.3A, since creditors generally have standing to seek relief under the provisions of Part 5.3A. But an issue would remain as to whether all appropriate parties (including other creditors) had been joined to the proceeding, given the nature of the questions proposed for separate determination and the nature of the relief sought in the 2003 proceeding. 10 If the separate determination of the questions takes place in the 2004 proceeding, these considerations have a different complexion. In that proceeding the plaintiffs assert their right as creditor to recover a debt. If the principal deed is pleaded in answer to their claim, they would appear to have an interest in contending that the deed has been terminated and therefore there is no relevant defence to their claim in debt. The fact that they are not parties to the deed ought not to prevent them from making such submissions. 11 The question whether the parties to the deed, or other creditors, should be joined will presumably arise by application of the defendant, probably before completion of the pleading process. I am not sure, at this stage, whether an application for joinder of parties should succeed. The matter would have to be fully argued. If other parties are joined, so that everyone interested in the proper construction of the deed is before the court, there would appear to be no obstacle to dealing with questions of construction of the deed in an application for separate determination of questions. But that may be possible even if the parties to the proceeding remain as at present. 12 There is an important contrast with the 2003 proceeding, as to the outcome of separate determination of the questions. If the plaintiffs are able to show that their "formal defect" argument is correct, and that the court has no jurisdiction to intervene under the three curative provisions, they may well be entitled to judgment in the 2004 proceeding (depending on precisely what other questions are raised in the pleadings). 13 All things considered, my view is that there is probably a good case for making orders for the separate determination of questions, as drafted in the appendix, in the 2004 proceeding, whether or not other parties are joined (and therefore, whether or not the present defendant consents). But in my view it is premature to make that decision. I think it is necessary, first, for the precise issues in the 2004 proceeding to be defined by pleadings, and for any application that might be made for the joinder of parties to be heard and determined. 14 I shall therefore dismiss the application for the separate determination of questions, so far as it relates to the 2003 proceeding, and adjourn the application so far as it relates to the 2004 proceeding, for further consideration once the pleadings have closed. I shall give directions to set up a timetable for pleadings in the 2004 matter, and for the making of any application for joinder of parties. I shall also give directions to establish a new timetable for the 2003 proceeding. At this stage costs should be reserved. ********** Appendix – Questions for Separate Determination A. Order pursuant to Part 31 rule 2 that the Court determine separately, before the trial of any other issue in the proceedings (such as discretionary issues and any issues as to the relief, if any, which is appropriate consequent upon the answers to the questions, including any equitable relief) the following questions: (1) At the second meeting of creditors held on 29 August 2003 under section 439A of the Corporations Act 2001, did the creditors of each of the following NYOL Group companies ("Companies") pass resolutions pursuant to s439C that each of the Companies execute deeds of company arrangement: Clynton Court Pty Ltd ("Clynton Court") Quotidian No.117 Pty Ltd Australian Metals Corporation Pty Ltd Great Central Holdings Pty Ltd Great Central Investments Pty Ltd Great Central Mines Pty Ltd Matlock Castellano Pty Ltd Matlock Mining Pty Ltd Newmont Wiluna Metals Pty Ltd? (2) If the answer to question 1 is "no": (a) in respect of the deed of company arrangement executed by Clynton Court ("Principal DOCA") and the deeds of company arrangement executed by the other Companies ("Secondary Deeds"), was their "execution" thereof purportedly by Clynton Court and the other Companies within the meaning of Clause 3.1 of each such instrument and also within the meaning of Clause 3.1 of the Secondary Deed entered into by Newmont Yandal Operations Pty Ltd? (b) in respect of the condition precedent in Clause 3.1 of each of the Principal DOCA for Clynton Court, the Secondary Deeds for the other Companies and also the Secondary Deed for Newmont Yandal Operations Pty Ltd, was that condition satisfied by the purported execution of the instruments identified therein even in the absence of the said creditors' resolutions? (c) are the Principal DOCA and the Secondary Deeds for the Companies: (i) presumed to be valid until such time as a Court declares or orders otherwise under Section 445G? (ii) by reason of Section 445H, operative between the time of their purported execution until termination under Clause 5.1 thereof or a Court making a declaration or order that such Deeds are void under Section 445G? (3) If the answer to question 1 is "no", was the purported execution of the Principal DOCA (in the case of Clynton Court) or each Secondary Deed (in the case of the other Companies) in the absence of the required creditors' resolutions: (a) a procedural irregularity within the meaning of Section 1322(2)? (b) a contravention of the Act within the meaning of Section 1322(4)(a)? (4) If the answer to question 1 is "no": (a) does the Court have jurisdiction or power under Section 445G(2) to now order that the Principal DOCA (in the case of Clynton Court) and the Secondary Deeds (in the case of the other Companies) are not void? (b) is the Court's exercise of jurisdiction or power under Section 445G(2) limited by Section 445G(3)? (5) If the answer to question 1 is "no": (a) was the execution of the Principal DOCA and the Secondary Deeds for each of the other Companies in the absence of the required creditors' resolutions a "contravention" of a provision of Part 5.3A within the meaning of Section 445G(3)? (b) if "yes" to (a), was such a provision of Part 5.3A "substantially complied with" within the meaning of Section 445G(3)(a)? (6) Do the provisions of Sections 445G and 445H provide a statutory codification: (a) excluding any jurisdiction or power otherwise than under s 445G to declare the Principal DOCA and the Secondary Deeds to be void or invalid?; (b) which precludes the Court's jurisdiction or power to make an order or declaration inconsistent with Section 445H? (7) If the answer to question 1 is "no", were the Principal DOCA and the Secondary Deeds for the Companies valid deeds of company arrangement nevertheless, whether by the operation of Section 451C(a) or otherwise? (8) If the answer to question 1 is "no", does the Court have jurisdiction or power under Section 447A(1) to modify the operation of Part 5.3A in respect of each of the Companies such that: (a) the creditors of each of the Companies are deemed or taken to have resolved to execute the Principal DOCA (in the case of Clynton Court) and the Secondary Deeds (in the case of the other Companies) in accordance with Section 439C? (b) alternatively, the Principal DOCA and the Secondary Deeds were properly executed under Section 444B? (c) alternatively, the Principal DOCA and the Secondary Deeds are and were at all relevant times valid and/or to be treated as deeds of company arrangement within the meaning of Part 5.3A? ********** Last Modified: 07/16/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.