ANE Furniture v Carodaba

28 It appears from the correspondence that Mr Star sub-let some premises from Mr Dean-Willcocks or his firm and that from time to time Mr Star refers matters such as the present to Mr Dean-Willcocks. Mr Dean-Willcocks' solicitors stated in a letter of 2 March 2009 that they were instructed that, historically, Mr Star had referred several matters only on average annually. They said that Mr Star was one of hundreds of accountants and lawyers who referred work to Mr Dean-Willcocks or his former firm. 29 The plaintiff says that it should be inferred that Mr Star has provided advice to Mr Bart at the time Mr Bart took steps to procure the assignment of leases to related companies. It says that Mr Star has a well-documented long relationship with Mr Bart. Mr Star was appointed as a voluntary administrator and subsequently as deed administrator to a related entity to the first defendant, a company called Roseneath Stud Pty Limited. However, that appointment was made as long ago as 1997. The evidence does not establish that Mr Star has advised Mr Bart except in respect of the appointment of a voluntary administrator to the first defendant. But even if he had provided advice in relation to the matters which the plaintiff says give rise to potential claims of the company against Mr Bart it would not follow that Mr Dean-Willcocks has an actual conflict of interest, nor that he has a perceived conflict of interest on reasonable grounds. 30 On the materials on this application I do not think there is a serious question to be tried that Mr Dean-Willcocks should be removed as administrator. The highest the evidence goes is that he was formerly in partnership with Mr Star, that there are some limited business dealings between them of the kind described earlier in these reasons and referred to in the correspondence between the solicitors, and that Mr Star has had an association with Mr Bart from time to time over a number of years, and has advised him in relation to the affairs of the first defendant in connection with the appointment of an administrator. I cannot see how that could give rise to any reasonable apprehension that Mr Dean-Willcocks lacked impartiality or independence. If a creditor formed such an apprehension it ought to be dispelled by the detailed analysis in Mr Dean Willcocks' reports of the potential claims the company has against Mr Bart. It is also relevant in this regard that on 11 March 2009 Mr Dean-Willcocks submitted a report to the Australian Securities and Investment Commission pursuant to s 438D(2) of the Corporations Act describing, again in detail, matters which might provide grounds for Mr Forster or Mr Bart to be disqualified from managing a corporation pursuant to s 206F of the Act. 31 As well as matters referred to earlier in these reasons, Mr Dean-Willcocks referred to the fact that Mr Bart had not provided him with information in relation to the affairs of the company which he had requested. There is no substance in the plaintiff's complaint that Mr Dean-Willcocks has acted supinely or that he failed to investigate possible breaches of the Act by Mr Bart, or that he has failed to pursue him for information. In his declaration Mr Dean-Willcocks stated that his assessment of the risk to his independence did not identify any real or potential risk, or any matter that would prevent his accepting his appointment. He stated that neither he, nor his firm, had within the preceding 24 months any relationships with the company, an associate of the company or any person or entity that has a charge on the whole, or substantially the whole, of the company's property. The nature of his contact with the company prior to accepting his engagement were discussions with Mr Bart, Mr Forster and Mr Star in which they discussed the company's financial affairs and circumstances, and the alternative courses of action available to the company, together with his remuneration. He declared that there were no other prior professional relationships or engagements that should be disclosed. 32 I do not accept that the meeting should be adjourned in order that the Court should first determine the plaintiff's claim for Mr Dean-Willcocks' removal as administrator. For the reasons which follow, there would in any event be serious objections to that course on the grounds of balance of convenience. 33 I do not think the content of the report provides any corroboration of the charge of lack of independence and lack of impartiality. Given the potential for a claim by the plaintiff to set aside a deed of company arrangement if a meeting of creditors resolves to approve entry into the deed, now is not a proper occasion for expressing any firm views on whether the administrator in his report failed to include all material information. If it is accepted for the sake of argument that he did not, it does not follow from that that the defects should be or could be attributed to a lack of impartiality or independence. 34 The question remains whether the meeting should be adjourned on the ground that the administrator's report is defective in the ways the plaintiff contends. 35 Counsel for the plaintiff was not able to point to any case in which orders such as those now sought have been obtained on the ground of alleged deficiencies in the notice or in the report to creditors. 36 The scheme of Pt 5.3A is to require a very expeditious assessment of the company's affairs and expression of the administrator's opinion. Section 445D gives the Court power to terminate a deed of company arrangement if information about the company's affairs with which the creditors were provided was false or misleading, provided that such information can reasonably have been expected to be material to the creditors' position. An order may also be made if such information was contained in the administrator's report under s 439(4), or if there was a material omission from the report. In McVeigh v Linen House Pty Ltd (No. 3) [2000] VSCA 4; (2000) 1 VR 31 Philips JA, with whom Tadgell and Buchanan JJA agreed said (at 56-57 [66]) that Pt 5.3A is: " ... a legislative scheme which deliberately postpones any curial examination or scrutiny of what is put before the creditors until after they have agreed upon the execution by the company of the deed ... "

37 The Court should be very wary of intervening before the second meeting of creditors on the grounds of deficiencies in the administrator's report. It is in the power of the creditors to adjourn the second meeting if they see fit and they are the best judges of what they consider to be material to their decision. 38 Counsel for the plaintiff referred to a valuation of the first defendant's office furniture and equipment, including its plant and equipment and motor vehicles at various shops. The valuation was made as at 30 December 2008. The "market value for existing use", which was based upon the value of the plant and equipment installed in its present situation and available for providing a service to the proprietor in a continuing use, came to a total of $2,840,000 for plant and equipment and $54,500 for motor vehicles. This valuation was referred to by the administrator in his report. The administrator also referred to what I take it was a valuation of the trading names on the basis of an existing use of an amount of $2 million. However, these values would be dependent upon the continuation of the company's business in the hands of a purchaser. 39 I do not accept the plaintiff's contention that it should be inferred that the administrator has simply not considered the sale of the business as a going concern. The basis for that submission was a statement made by Mr Dean-Willcocks that he had indicated to creditors at the first meeting that he did not propose to offer the business for sale at that stage. He noted that it was likely that at the next meeting of creditors a deed of company arrangement would be proposed on the basis that the business of the company continued. He also pointed out there was a practical problem associated with any sale given there were some 16 landlords and that apparently a number of the leases were not in the name of the company. As I said earlier in these reasons, in his report to creditors Mr Dean-Willcocks stated that he thought it very unlikely that the business was saleable. It is fair to say that he did not expound the grounds for that opinion. Some such grounds can be inferred from the correspondence between the solicitors, or may be gleaned from the report, including the loss sustained by the company, the number of different leases of premises at which the company trades and the fact that some of the leases are not in the company's name. However, whatever may be the merits of the criticism of the report for not stating the grounds for the opinion that the business is not likely to be saleable, such criticism does not warrant an order adjourning the meeting. 40 The same is true in respect of the plaintiff's submission that Mr Dean-Willcocks has understated the level of potential recoveries if a liquidator were to pursue claims against Mr Bart or companies related to the first defendant. That is so for a number of reasons. I have already mentioned two. Namely, that the creditors, if they wish for further information on these matters can adjourn the meeting. Also the plaintiff is not necessarily without remedy if the deed of company arrangement is approved, as an application could be made for termination of the deed pursuant to s 445D. No doubt the plaintiff would have to show that material omitted or mis-stated was material to the creditors' position. Of course, the plaintiff will be entitled to address the meeting to persuade creditors of the correctness of its position. 41 There are other reasons why the meeting should not be interfered with. There is the potential loss to creditors if the deed of company arrangement which is now proposed does not proceed because the meeting is adjourned. Next, the administrator is carrying on the company's business and is liable for the debts which he incurs, although entitled, of course, to indemnity from the company's assets. There is no guarantee that the administrator will be prepared to continue to trade until an adjourned meeting is held. 42 In both these last respects it is relevant that no undertaking as to damages has been proffered by the plaintiff and, in any event, even if such an undertaking had been proffered, there is no evidence as to the ability of the plaintiff to satisfy such an undertaking. 43 Next, the statements upon which the plaintiff relies to show that the administrator has not properly investigated the sale of the company's business as a going concern were made at the first meeting of creditors. That is to say, Mr Dean-Willcocks said that he did not propose to offer the business for sale at this stage and it was likely that at the next meeting a deed of company arrangement would be proposed on the basis that the company's business continued. So far as appears from the evidence no objection was taken at that time by the creditors attending the meeting of whom the plaintiff was one. 44 Next, on 2 March 2009 the administrator's solicitors proposed that the plaintiff nominate a representative to review the administrator's investigation and report to creditors with full access to books and records. They sought that any issues which required clarification or further investigation could be raised at the meeting and adjourned if necessary to allow for further enquiries. The proposal that a nominated representative review the administrator's investigation with full access to books and records was not adopted. 45 In all of these circumstances it would not be appropriate to adjourn the meeting, assuming that I have the power to do so. The existence of that power was not disputed at least on the first ground on which it was advanced. I can assume that the power would arise under either or both of the other grounds the plaintiff identified. But assuming the existence of the power, for the reasons I have given, it is not appropriate to make the orders sought. 46 For these reasons I order that the claim for relief in para 4 of the originating process be dismissed.

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