Farrow Mortgage Services Pty Ltd, Re [1997] QSC 97

4- 1''1/oq7 IN THE SUPREME COURT OF QUEENSLAND No. 212 of 1993 Before the Honourable Mr Justice Muir IN THE MATTER OF THE CORPORATIONS LAW AND IN THE MATTER OF MORTGAGE SERVICES PTY LIQUIDATION) (ACN 006 125 757) REASONS FOR JUDGMENT - MUIR J Judgment delivered 29 May 1997 FARROW LTD (IN CATCHWORDS: SECTION 477(2A) CORPORATIONS LAW - approval for compromise of a debt Counsel: G. Allan Solicitors: Carter Newell Hearing Date: 14 April 1997 This judgment is to i. 1 f i only. It is not to .:~:;:- --.~.- "._'-. ~1 and private study 1 other without lL____________ .~...... . ---~.----------------------~ -- 1 of 5 -- IN THE SUPREME COURT OF QUEENSLAND No. 212 of 1993 Before the Honourable Mr Justice Muir IN THE MATTER OF THE CORPORATIONS LAW AND IN THE MATIER OF FARROW MORTGAGE SERVICES PTY LTD (IN LIQUIDATION) (ACN 006 125 757) REASONS FOR JUDGMENT - MUIR J Judgment delivered 29 May 1997 The applicant in this matter is the liquidator of Farrow Mortgage Services Pty Ltd (in liquidation). He seeks the Court's approval under s.477(2A) of the COllJoration.') Lall' for the compromise of a debt owing to the company by Raymond John Gatiss, the respondent to the application. In proceedings commenced by a \\Tit of summons in action number 212 of 1993 in this Court, the company claimed against the respondent and two others the sum of $300,688.42 together with interest thereon at the rate of 23.75% per annum from 23 June 1993 until judgment as monies due and owing by the respondent and such other persons under a guarantee in writing given by the respondent in favour of the company on or about 6 December 1989. The guarantee was alleged to be in respect of the obligations of Thor Investments Pty Ltd to the company. The respondent, who is the first defendant in the action, and the third defendant delivered a further amended defence and counterclaim in the action in which they claimed, inter alia- (a) A declaration that no money is owing by the first defendant and the third defendant to the company under such guarantees: -- 2 of 5 -- 2 (b) An order pursuant to s.87 of the Trade Practices Act 1974 declaring such guarantee to be unenforceable against the respondent and the third defendant. The applicant commissioned Bent & Cougle Bentleys to act as investigating accountants in respect of the affairs of the respondent. That firm delivered a report dated 25 July 1996. The report contained the following recommendation- "If the debtor were to be made bankrupt it is unlikely that there would be any divisible assets for creditors. It is also unlikely the debtor would be assessed to make contributions out of his income unless he was assessed on the total net income from the Raymond & Linda Gatiss Family Trust. As it appears that the debtor's wife works for the consulting business it would be reasonable to expect that she would participate in part in any distribution of the net income. However we also note that she will receive money via the reduction of her loan account. Contributions over the period of Bankruptcy cannot be assessed due to uncertainty of future income. Despite our doubts as to whether the debtor will be in a position to comply with all of the terms of his proposal we believe it should be accepted. In our opinion it will ensure some retum on the debt whereas it is unlikely a dividend would be paid in the event of bankruptcy. " The company and the respondent have entered into a deed of compromise which is subject to the approval of this Court. Under the compromise agreement the respondent agrees to- (a) Pay the company $20,000.00 within seven days of the date upon which the compromise is approved; (b) Pay the company on 1 August 1997, 1 August 1998, and 1 August 1999, the greater of 30% of the net income recei ved by the respondent during the twelve month period prior to 30 June of the year in which the payment is to be made, or $12,000.00; (c) Deliver to the company all right, title and interest in all di\'isible property owned by the respondent or in which the respondent has an interest or entitlement; (d) Sign a consent judgment in the form of that annexed to the compromise agreement; (e) File a notice of discontinuance of the counterclaim; (f) Release the company from all claims, actions and demands which -- 3 of 5 -- 3 relate to any matter referred to in the claim or counterclaim. A Mr Robert Edge has sworn an affidavit in support of the application. He is an accountant who has been appointed a consultant to Pyramid Building Society (in liquidation). the company and other companies. He is authorised by the applicant to swear the affidavit. He swears to having discussed the application with the applicant and to being of the belief that it would be in the best interests of the creditors of the company for it to compromise the claim and counterclaim for the reasons that- "(a) If Gatiss was a bankrupt. it IS unlikely that there would be any divisible assets from creditors; (b) If Gatiss was a bankrupt. it is unlikely that he would be assessed to make contributions out of his income: (c) The investigating accountants belief the proposal offers a return on the debt greater than any dividend Farrow would be likely to receive if Gatiss was declared bankrupt." Although the material in support of the application is, in my view. somewhat deficient. I have decided to accede to it without requmng further evidence which would occasion incurring additional costs. The deficiency to which I refer is the way in which Mr Edge. on behalf of the applicant, has expressed an opinion which appears to do little more than adopt the investigating accountant's "beliefs". It is clear to me that the application seeks to "compromise" a debt to the company [in] an amount greater than $20,000.00". The applicant liquidator has made a commercial assessment as to the course of conduct which is in the best interests of the company' s creditors. His view is that the compromise will offer some return to creditors whereas. in its absence, there is likely to be none. On the material before me I can see no ground for doubting the prudence of the applicant liquidator's proposal. In State Bank of New SOllth Wales v. Turner Corporation Ltd (provisionaL liquidator appointed) (1994) 14 A.C.S.R. 480, -- 4 of 5 -- 4 Tamberlin J. observed at 483- "The power given to the liquidator by s.477(2A) is directed to achieving the efficient winding up of the company, that is the collection and distribution of its assets for the general benefit of its creditors. Liquidator includes a provisional liquidator. The controlling consideration in the exercise of power under s.477 is the interest of the creditors: (Scare! Pty Ltd) Re City Loan and Credit Corporation Pty Ltd (1988) 12 A.C.L.R. 730, 68 c.L.c. 219; Re Sped/ey Securities (in liq) (1992) 9 A.C.S.R. 83." The applicant's course of conduct appears to be in the interests of creditors. I order in terms of the draft initialled by me and placed with the papers. -- 5 of 5 --