Supreme Court New South Wales Medium Neutral Citation: Angus Carnegie Gordon In the Matter of Macquarie Towns Partners Real Estate Pty Ltd (Subject to Deed of Company Arrangement) [2011] NSWSC 806 Hearing dates: 27 June 2011 Decision date: 27 June 2011 Jurisdiction: Equity Division - Corporations List Before: Hammerschlag J Decision: Order for the modification of the operation of Pt 5.3A with effect that Deed of Company Arrangement did not terminate Catchwords: CORPORATIONS ACT 2001 (Cth) - Pt 5.3A, s 447A(1) - application to modify operation of the Part to the terms of the Deed of Company Arrangement where the deed terminated in accordance with its provisions of which fact the deed administrator and creditors were oblivious - modification appropriate in the circumstances Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Sims; re Huon Corporation Pty Limited (2006) 58 ACSR 620 Farnsworth v ASIC (2007) 25 ACLC 1317 Forrest Nursery Pty Limited, in the matter of Euco Limited v Lopez and Verge as joint and several liquidators of Euco Limited (In Liquidation) [2006] FCA 935 Category: Principal judgment Parties: Angus Carnegie Gordon - Plaintiff Representation: Counsel: S.M. Golledge - Plaintiff Solicitors: Macpherson & Kelley Lawyers (Sydney) Pty Limited - Plaintiff File Number(s): 2011/123843 EX TEMPORE Judgment 1HIS HONOUR: The plaintiff was appointed voluntary administrator of Macquarie Towns Partners Real Estate Pty Ltd ACN 103 305 371 ("the Company") on 8 October 2009. 2On 18 December 2009 the Company's creditors resolved that it enter into a Deed of Company Arrangement ("the Deed") and that the plaintiff be appointed deed administrator. 3On 11 January 2010 the plaintiff entered into the Deed with Mr Kenneth Hardaker, the sole director of the company, who undertook to pay $108,000 by way of 12 monthly instalments of $9,000 each, creating a deed fund for the benefit of creditors. 4Under the Deed, Mrs Amelia Jane Hardaker guaranteed Mr Hardaker's obligations to make these payments. As security for her obligations, she provided a second mortgage over certain land at Cullen Bullen, New South Wales. On 14 December 2010 the plaintiff became aware that this property had been transferred by a prior mortgagee under a power of sale. 5By 3 April 2011, in apparent default of by Mr Hardaker of his obligations under the Deed, only $49,000 had been paid. Also, according to the plaintiff, it came to his attention that Mr Hardaker had defaulted under the DOCA in other respects. 6Clause 17 of the Deed is entitled Termination. It provides for various means by which the Deed may terminate. 7Clause 17.1 of the Deed provides: Subject to this Part, the Deed Period and the Deed shall terminate on the Termination Date. 8Clause 1.1 defines "Deed Period" to mean the period commencing on the Commencement Date and ending on the Termination Date. 9It defines Termination Date to mean: twelve (12) months after the Commencement Date or any earlier date fixed in accordance with clause 17 of this Deed or any other date determined by the Deed Administrator which alters the date of 12 months or earlier in accordance with Clause 17 and such date will be at the Deed Administrator's sole discretion and supersedes any earlier term. 10Clause 4.1 of the Deed is in the following terms: The Deed Administrator's appointment shall begin on the Commencement Date and continue until the earlier of: (a) the Termination Date, or (b) the date upon which this Deed is terminated in accordance with Clause 17 of this Deed, or (c) until the Deed Administrator retires or is removed from office in accordance with this Deed. 11The Termination Date was thus 11 January 2011, by virtue of cl 17.1, the Deed terminated on that date, as did the plaintiff's appointment as Deed Administrator. The plaintiff (and it seems the creditors including the Australian Taxation Office) were unaware of this. 12On 19 January 2011, in the light of Mr Hardaker's default, and in the light of information the plaintiff had received with respect to Mrs Hardaker, the plaintiff called a meeting of creditors for 28 January 2011 to put to creditors a resolution in accordance with section 445E of the Corporations Act 2001 (Cth) ("the Act") that the Deed be terminated and that the Company be wound up. The creditors resolved to adjourn the meeting for 28 days. 13On 17 February 2011 the plaintiff circularised the creditors reconvening the meeting on 25 February 2011. On that day the creditors resolved to adjourn the meeting for a period of up to 35 days. 14On 24 March 2011 the plaintiff circularised the creditors reconvening the meeting on 1 April 2011. On 1 April 2011 the resolution was put but was not carried because entities related to Mr Hardaker voted against it. Thereafter the plaintiff instructed solicitors to prepare an application to court for an order under s 445D of the Act terminating the Deed and winding up the company. 15On 6 April 2011 the plaintiff's attention was drawn to the fact that the Deed and his appointment may have terminated. He says that had he been aware of this earlier he would have exercised his discretion under the definition of "Termination Date" to determine that date to be a later date. He says that at all times in between he acted as if the Deed was on foot. That same day he received a request from Mr Hardaker to call a meeting of creditors to consider variations to the Deed. 16Section 447A(1) of the Corporations Act 2001 (Cth) ("the Act") provides: The court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. 17By Originating Process filed on 14 April 2011, the plaintiff moves for an order under the section to modify the operation of Pt 5.3A of the Act so as to have the effect that the Deed will not have terminated as a consequence of the Termination Date having been reached. 18The expansive operation of this provision was described by Gyles J in Sims; re Huon Corporation Pty Limited (2006) 58 ACSR 620. It is not necessary to repeat his Honour's observations, suffice it to say that the nature of the order sought is within the jurisdiction described by his Honour and that the circumstances which have arisen in this case warrant an order for the modification of the Part. See too Farnsworth v ASIC (2007) 25 ACLC 1317 and Forrest Nursery Pty Limited, in the matter of Euco Limited v Lopez and Verge as joint and several liquidators of Euco Limited (In Liquidation) [2006] FCA 935. 19The type of order sought is in the interests of creditors and will facilitate them having the opportunity to vote in respect of the Deed, particularly in the light of what appears to be Mr Hardaker's default. It will also afford him the opportunity to propose variations to the Deed for the consideration of the creditors. 20The plaintiff's solicitors have been in contact with Mr Hardaker's solicitors. His early position was opposition to the order sought. However, through his solicitors and subject to certain conditions, he has now indicated his consent to the orders sought in the Originating Process. I was informed from the bar table that the plaintiff accepts those conditions, which include steps to be taken to convene a meeting which will enable the creditors to consider the variation proposed by Mr Hardaker. 21The creditors have been notified of the application. None has appeared to oppose the orders sought. 22I am not satisfied with the precise terms of the order proposed in the Originating Process. However, in my view an order in the following terms should be made: Pursuant to s 447A(1) of the Corporations Act 2001 (Cth)("the Act") the Court orders that Pt 5.3A of the Act shall apply to the Deed of Company Arrangement made on 11 January 2010 between Macquarie Towns Partners Real Estate Pty Limited (Administrator Appointed) ACN 103 305 371, Kenneth Reginald Hardaker, Amelia Jane Hardaker and Angus Carnegie Gordon ("the Deed") with the following modification: The operation of s 445C(c) of the Act is modified to the extent that notwithstanding that under cl 17.1 of the Deed it shall terminate 12 months after the Commencement Date as defined in the Deed, the Deed shall not terminate on that date by reason only of the operation of cl 17.1 and shall not, unless otherwise terminated under some other provision of the Deed or under the Act or under an order made under the Act, terminate until 11 January 2012. 23I note and accept from the plaintiff his undertaking that he will not seek or be paid any remuneration for any effort attributable to the bringing of these proceedings and that the company will not be charged any expenses, including legal expenses, incurred with respect to the bringing of these proceedings. ********** 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. Decision last updated: 28 July 2011