In the matter of Property Trade Group 1 Pty Limited [2015] NSWSC 2141

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Property Trade Group 1 Pty Limited [2015] NSWSC 2141 Hearing dates: 24 August 2015 Date of orders: 24 August 2015 Decision date: 24 August 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: DOCA terminated; originating process otherwise dismissed. Catchwords: CORPORATIONS – voluntary administration – deed of company arrangement ("DOCA") – termination of DOCA – where parties consent to termination of DOCA – winding up of company formerly in administration – transition from DOCA to creditors' voluntary winding up – appointment of administrators as liquidators. Legislation Cited: (CTH) Corporations Act 2001, s 439A, s 445D, s 445D(1), s 446A, s 446B, s 449, s 449(2), s 449(2A), s 449(2B), s 449(2C) (CTH) Corporations Regulations 2001, reg 5.3A.07 Category: Principal judgment Parties: G Developments (NSW) Pty Limited ACN 151 370 179 (plaintiff) Property Trade Group 1 Pty Limited (subject to a deed of company arrangement) ACN 155 994 504 (first defendant) Blair Alexander Pleash (second defendant) David Allan Ingram (third defendant) Representation: Counsel: G D McDonald (plaintiff) A W Smith (second and third defendant)

Solicitors: Evans Lawyers (plaintiff) Rankin Ellison Lawyers (first defendant) Redchip Lawyers (second and third defendants) File Number(s): 2015/56031

Judgment (ex tempore) 1. HIS HONOUR: On or about 1 December 2014, the first defendant company Property Trade Group 1 Pty Ltd appointed the second and third defendants Blair Alexander Pleash and David Allan Ingram as its voluntary administrators. At a meeting of creditors held under (CTH) Corporations Act 2001, s 439A, on 15 January 2015, the creditors resolved that the company execute a deed of company arrangement ("DOCA"), and on 30 January 2015, the company executed a DOCA between it, the administrators and the company's sole director, Mr Glen Taylor. 2. Relevantly, the DOCA provided by cl 8.1 that the administrators must create a deed fund comprising any cash at bank held at the commencement date of the deed, and contributions by way of instalments of $2,000 payable by the director upon the commencement date, and $78,000 payable by the director in monthly instalments of $1,500 each within 28 days of execution of the DOCA, with the balance as at 30 June 2015 to be paid on 30 June 2015. In that respect, cl 8.1(b) provided that time was of the essence subject to the director being given 14 days to remedy any default of any payment of any deed contribution. Clause 8.1(c) provided for the issue of a demand on the director, including for interest, if the director failed to make or to cause to be made the deed contributions when payable, but only on the expiry of 14 days from the failure to make the deed contributions. Clause 8.2 provided that a failure to comply with any of the obligations set out in cl 8.1 would amount to a fundamental breach of the DOCA. 3. On 16 June 2015, the deed administrators sent to the director a notice particularising a failure to pay the monthly repayment contributions of $1,500 due on 30 April 2015 and 30 May 2015 and requiring payment of the outstanding amount of $3,000 within 14 days. The director replied on the same day, asserting that the administrators had been paid $20,000 in the last few weeks and that he did not consider himself to be in default. However, that sum of $20,000 was a sum payable in respect of a settlement of other proceedings, and was paid not by way of contribution but into a suspense account pending the resolution of a dispute that emerged concerning that settlement, the validity of which the director himself disputed. The director did not remedy the default, however, and since then, the balance of the $78,000 has become payable. The evidence establishes that no further sum has been paid to the deed administrators in that respect. 4. On 23 February 2015, the plaintiff G Developments NSW Pty Ltd commenced proceedings seeking an order pursuant to Corporations Act, s 445D, terminating the DOCA, and in lieu thereof, that the company be wound up in insolvency. That application was made essentially on the basis that the resolution that the company execute a DOCA was carried substantially on the votes of the company's sole director, Mr Taylor, whose claim to be a creditor at least to that extent was challenged. 5. The proceedings have taken a curious course. At one stage, it appeared that they had been settled as between the plaintiff and the first defendant, but the validity of that settlement has been disputed by both parties, who apparently deny that the intermediary who negotiated it was authorised to act on behalf of either of them. That intermediary was joined as fourth defendant, but the plaintiff has now settled its dispute with the fourth defendant and seeks leave to discontinue the proceedings against it. 6. The plaintiff and the second and third defendants have now agreed that the DOCA should be terminated and the matter proceed by way of winding up with the administrators becoming the liquidators. The first defendant has been notified of the re-listing of the matter today for that purpose, but has not responded and does not appear to have taken any active part in the proceedings since 15 June. 7. On the current state of the evidence, I am satisfied for the purposes of s 445D(1)(d) that there has been a material contravention of the deed by Mr Taylor, a person bound by the deed in his capacity as director, in failing to make the contributions to which I have referred. I am also satisfied that as a matter of discretion, it is appropriate to terminate the deed and that the administrator of the company's affairs proceed by way of a creditors' voluntary winding up, to which it will transition upon the termination of the deed by operation of (CTH) Corporations Regulations 2001, reg 5.3A.07(1)(a). 8. While Corporations Act, s 499, does not make specific provision for the case of a DOCA that transitions to a creditors' voluntary winding up by operation of s 446B and reg 5.3A.07, such provision as it does make in ss 499(2), (2A), (2B) and (2C) in respect of a transition under s 446A, and the interrelationship of s 446B with s 446A, indicates, as it seems to me, that the same consequence is intended to follow, and that at least unless the Court otherwise orders, the deed administrators would become the liquidators. 9. Although there has been some discussion about whether one of the deed administrators wishes to be so appointed, I think administrators must, by consenting to be appointed as administrators, be taken thereby to consent to become liquidators in the event that the administration transitions to a creditors' voluntary winding up under s 446A. In any event, if he does not wish to continue to act as liquidator, he can resign. 10. The plaintiff, who has paid the sum of $20,000 on account of the purported settlement to which I have referred to the second and third defendants, consents to their retaining it and applying it to their remuneration and expenses, and in circumstances where no one appears to contend that the settlement is valid and enforceable, there seems no reason to stand in the way of that course. In particular, it is notable that, in an affidavit sworn on 12 June 2015, Mr Taylor denies that he ever signed any version of the deed of settlement and never authorised the fourth defendant to negotiate a settlement of the proceedings on his behalf. Thus it does not seem to me that Mr Taylor has any say in what becomes of the $20,000 apparently paid pursuant to a settlement which he says he never authorised. 11. The Court therefore, by consent as between the plaintiff and the second and third defendants, orders that: 1. The second and third defendants may, notwithstanding undertaking A given on 1 June 2015, release and pay to themselves the sum of $20,000 held in a bank account by them in accordance with the said undertaking in partial satisfaction of their remuneration and expenses as voluntary administrators and subsequently deed administrators of the first defendant. The Court further orders that: 1. Pursuant to Corporations Act, s 445D(1)(d), the deed of company arrangement executed by the third defendant dated 30 January 2015 be terminated. 2. The originating process filed 23 February 2015 be otherwise dismissed. 3. All prior unpaid costs orders made in the proceedings are set aside. 4. There be no order as to costs, to the intent that each party bear its own costs. 5. The plaintiff have leave to file a notice of discontinuance in respect of its proceedings against the fourth defendant. 6. The interlocutory process filed by the plaintiff on 24 June 2015 be otherwise dismissed. 7. The hearing of these proceedings listed to commence on 9 October 2015 be vacated. 8. The order made on 24 June 2015 and extended on 29 June and 27 July 2015 restraining the fourth defendant from dealing with the funds paid to the fourth defendant of $50,000 on 4 May 2015 and $20,000 on 11 May 2015 pursuant to the document entitled "Deed Of Settlement" between the plaintiff and the first defendant dated 4 May 2015 be discharged with effect from today.