ACN 010 852 936 P/L, Re (formerly Taddio Constructions P/L) [2000] QSC 372

State Reporting Bureau :.-~::.,_Q_u_e_e_n_s_l_a_n_d_G_o_v_e_rn_m_e_nt -,~\1; Q,epJr.:,,ent ofJuslicc and ,\l(orncy•Gcncr.il 40070 Transcript of Proceedings Copyright in ihis transcript is vested in the Crown. Copies thereof must not be made or sold wiihout the written authority of the Director, State Reporiing Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION HOLMES J · No 4510 of 2000 IN THE MATTER OF THE CORPORATIONS LAW and IN THE MATTER OF ACN 010 852 936 PTY LTD (formerly TADDIO CONSTRUCTIONS PTY LTD) BRISBANE .. DATE 05/10/2000 JUDGMENT REVISED COPIES ISSUcD State Reporting 8ure.:1u Date /J., I (o I ~- 4'h Floor, The Law Courts, George Street, Brisbane, 0. 4000 Telephone: (07) 3247 4360 Fax: (07) 3247 S5J2 ·. 1 -- 1 of 11 -- 05102000 T1/TW12 M/T 8333/2000 (Holmes J) HER HONOUR: The applicant in this matter, the director of the company in question, which was formerly Taddio Constructions Pty Ltd, seeks declarations that a resolution passed at a creditors meeting on 9 May 2000 be set aside, (that presumably means she wants a declaration that it was invalid) and a declaration that the deed of company arrangement, executed by the company in October '99, remains in force and has not been validly terminated. The resolution in question is to the effect that the company go into liquidation and, if, by 16 June 2000 the Taddio Group has, in the opinion of the liquidator, submitted a workable deed, which is approved by the liquidator, then the liquidator should seek appointment as an administrator of 1 10 20 the deed. 30 There are three grounds on which the declarations are sought. The first is that notice of the meeting, at which the resolution was passed, was insufficient. Given that there is no suggestion of practical detriment, I consider 40 that of little moment and I would readily apply section 1322 subsection 4 of the Corporations Law to cure the deficiency. Another ground is that proxies were wrongly rejected at the meeting in question. I am not convinced that that was the 50 case. 60 2 JUDGMENT -- 2 of 11 -- 05102000 T1/TW12 M/T 8333/2000 (Holmes J) There was some question raised as to the conduct of the administrator, Mr Hellen, who was appointed on 10 April 2000. From my perspective, having looked at the_ material, it seems to me that Mr Hellen steered a difficult path 1 between competing interests. I am not persuaded that his 10 rejection of the proxies was other than appropriate. The more substantial grounds for seeking the declaration that the resolution was invalid are these: that the pre-conditions for winding up were not met, that there was 20 not; in terms, a resolution for winding up and that notice was not given of the proposed resolution as passed. It is necessary to look at the background to the meeting. A notice of meeting was sent to creditors, which contained an 30 advice that the purpose of the meeting was to consider and vote on a number of resolutions. The first listed in the notice of meeting was for variation of the deed, in terms which provided for Mr Taddio to provide assistance in collecting company debts, and for some arrangements to be made about the sale of a backhoe and the payment of other funds by Mr Taddio. (Mr Taddio seems to have been the moving force behind the business conducted by 40 the company and previously to have been a director of it. 50 He was replaced by his step-daughter, the applicant here.) The second of the mooted resolutions was that the deed be terminated and that the company be wound up. There were a 3 JUDGMENT 60 -- 3 of 11 -- 05102000 T1/TW12 M/T 8333/2000 (Holmes J) number of other resolutions in relation to remuneration of the administrator and provision for questions and any other business. There was a report to creditors provided by the administrator. It discussed the first of the resolutions about which I have spoken, for a proposed variation of the deed and for certain obligations on Mr Taddio. There was mention in the report of some developments being undertaken by the company. And then by way of summary, the administrator expressed his belief that it was in the interests of creditors to terminate the deed of company arrangement and wind up the company for a number of reasons which he gave as to the dubious prospects of the deed of arrangement. At the meeting itself there were very clearly two opposing camps, as they have been described in argument. One consisted of Ms Mason, who seems to have been involved with 1 10 20 30 an organisation called the Building Industry Credit 40 Reference Bureau and who was at the meeting as representative of a number of creditors. Mr Foggo, who seems to have been an associate of hers was also in attendance with proxies from numerous creditors. On the other side of the line were Mr Taddio, Christine Taddio, presumably a family member, and Melissa Thompson, the applicant here. In addition, their solicitor, Kathryn 4 JUDGMENT 50 60 -- 4 of 11 -- 05102000 T1/TW12 M/T 8333/2000 (Holmes J) Walker, attended. All of those persons held proxies. As did the chairman himself. There appear to have been three independent representatives of creditors, one of whom represented two creditors: that was Mr Michael Janelzki. The other two persons, who do not clearly seem to have fallen into either camp, were Mr Terry Bonisch and Ms Elizabeth Towell. The minutes of the meeting indicate that the main issues to consider were outlined at the outset as: the variation of deed which I have outlined, involving certain things to be done by Mr Taddio; the termination of the deed and the winding up of the company; and other matters about remuneration, generally, in terms of the notice of meeting. There was some reference to the administrator's report. There was a discussion of proxy rejections, after the chairman had actually adjourned the meeting to consider the proxies and taken some steps. Then after general discussion, Mr Foggo proposed the resolution, which is the subject of the application for declaration here. There was then a five minute adjournment to allow Mr Taddio 1 10 20 30 40 to-consider what resolution he wanted to put into relation 50 to variations. When the meeting resumed, the resolution that the Taddio camp proposed was for an adjournment of the meeting to enable variations to the deed to be prepared with 5 JUDGMENT 60 -- 5 of 11 -- 05102000 T1/TW12 M/T 8333/2000 (Holmes J) some indication of the time lines and payments which would then be involved. That resolution was put to the meeting. There it was lost in the following way. There were 31 votes for it, representing $782,979 of the amounts thus far claimed for creditors, and against, 39 representing $248,521. The chairman exercised his casting vote against the 1 10 resolution. The Foggo resolution was then put and was 20 passed. The numbers were the same on each side, four at 39, against 31 with the same figures in terms of amounts associated with those voting. The chairman exercised his casting vote in favour of the 30 resolution and the minutes record that he declared the company wound up. There was then an objection by Miss Walker, solicitor, for Mr Taddio to a motion having been put forward that was not 40 in the notice of meetings sent to the creditors. The chairman noted that the proposal that the company be wound up was in the notice of the meeting and expressed an opinion that the resolution was not materially different. 50 rt appears that the three representatives of other creditors did not move significant resolutions at the meeting, although Miss Towell had seconded a motion for an 6 JUDGMENT 60 -- 6 of 11 -- 05102000 T1/TW12 M/T 8333/2000 (Holmes J) adjournment while the Taddio camp considered its proposal and, subsequently, Mr Bonisch moved, after some indication that it was desirable, for the appointment for a committee of creditors. Plainly enough, the resolution was not effective to wind up the company. Section 445C of the Corporations Law provides for the termination of a deed of arrangement in certain specified conditions. In relation to circumstances relevant 1 10 here, it requires a resolution by the company's creditors 20 terminating the deed at a meeting. That did not occur in this case. The deed was not terminated by the resolution. Section 445E provides that creditors may terminate a deed and resolve that a company be wound up, but it is necessary 30 as a pre-condition to the resolution for winding-up that the creditors pass a resolution terminating the deed; and, as I said, that did not occur here. That leads to the question of whether the Court should rectify those defects under s.447A of the Corporations Law which gives a power to make such an order as the Court thinks appropriate about how the part is to operate in relation to a particular company. The width of the power 40 under that section has·been confirmed by the High Court in 50 Australasian Memory v. Bryan 74 Australian Law Journal Reports 991. 7 JUDGMENT 60 -- 7 of 11 -- 05102000 T2/SE25 M/T 8333/2000 (Holmes J) The authorities to which I was referred in relation to situations where the 447A power has been exercised, which v included Australian Memory, Corso ~Keyra Constructions (1994) 33 New South Wales Law Reports 607 and re Carldor Pty Ltd 25 ACSR 720, generally involved cases where there was not dissension amongst the creditors as to the end to be achieved and in which the means of doing so was inappropriate. They were not cases as the present is where the creditors were opposed to each other in different camps and the incorrect procedure was adopted. There was obviously in this case a divergence of views with two very clear lines of creditors and the difficulty is that there were four votes which were, it seems, unaligned which may have made a difference if in fact the resolution had been put in different terms and those creditors or those representatives of creditors had had a different understanding of what was involved. That is not to say that the Court can judge what in fact those creditors understood by the resolution but I do not consider I can be satisfied that the majority of creditors wanted a winding up, as opposed to understanding from the resolution that there was perhaps a variation on the Taddio proposal. Simply, the resolution was in such terms in my view that one cannot assume that the creditors voting, apart from those who fell into the clear camps who knew what ~hey 8 1 10 20 30 40 50 60 -- 8 of 11 -- 05102000 T2/SE25 M/T 8333/2000 (Holmes J) wanted, understood that the deed of administration was to be terminated. One of the difficulties is that the resolution came from 1 someone other than the administrator and there is the 10 question about whether those at the meeting understood that the resolution was intended to effect the proposal that the administrator had put or whether they saw, as I have said, yet another variation being offered. It seems to me that at the least those opposed were entitled to vote on a resolution-put in clear terms. That is not to say that I take a view that s.447A or the 20 power in it is confined to cases where there is general agreement among the creditors; there may be such an obvious 30 case for giving effect to a resolution notwithstanding a disagreement that s.447A would be applied. But in the present case, although there has been a most undesirable delay now of five months since the meeting, the material is silent on whether there is any change in the current prospects for the administration. In May, however, there were at least some prospects of funds being forthcoming although the administrator was, perhaps rightly, sceptical about that. The end result, however, is, given that there were the two opposing parties, the possibility of confusion among the unaligned voters and the fact that the resolution was not clear in its terms and to a lay person might have meant 9 40 50 60 -- 9 of 11 -- 05102000 T2/SE25 M/T 8333/2000 (Holmes J) something quite different, that it seems to me that it is not such a clear case as to where the interests of creditors lie that I would be justified in using s.447A to end the administration. The result of that is that I consider that the applicant is entitled to the declarations sought with some minor amendment in terms.~G Accordingly I declare that the resolution passed at the creditors' meeting of the company 1 10 held on Friday, 19 May 2000, to the effect that the company 20 go into liquidation and if by 16 ·June 2000 the Taddio Group has, in the opinion of the liquidator, submitted a workable deed which is approved by the liquidator, then the liquidator should seek appointment as an administrator of the dee<_Jwas invalid. I declare that the deed of company arrangement executed by the company and dated 5 October 1999 remains in force and has not been validly terminated. 30 40 HER HONOUR: It seems to me that the applicant was entitled to seek the assistance of the Court in circumstances where at the very best the resolution passed was ill-framed and ill-considered. In those circumstances I think that she ought to have her costs and I order that the respondent pay 50 the applicant's costs of and incidental to the application to be assessed. 60 10 -- 10 of 11 -- 05102000 T2/SE25 M/T 8333/2000 (Holmes J) HER HONOUR: The order will be that the respondent pay the applicant's costs of and incidental to the application including reserved costs to be assessed. .11 1 10 20 30 40 50 60 -- 11 of 11 --