Arcfab Pty Ltd v Boral Ltd [2007] NSWSC 224 | Case summary

4937/06 KYLE HOUSE PTY LIMITED v ACN 000 016 213 PTY LTD JUDGMENT 1 The question before me is whether the plaintiff should be given leave to amend its statement of claim filed on 21 September 2006. That question is posed by the plaintiff's interlocutory process filed on 20 February 2007. 2 By the statement of claim, the plaintiff sues the defendant for unpaid rent for the period July 2005 to September 2006 for shop premises in the City of Sydney, plus interest. The rent is said to have become owing, due and payable under a lease dated 29 October 2001 between the plaintiff as lessor and the defendant as lessee. 3 By its defence filed on 30 November 2006, the defendant pleads, in summary, that (a) on 8 March 2004, the defendant became subject to administration under Part 5.3A of the Corporations Act 2001 (Cth) and Mr Lombe and Mr Greig became administrators; (b) on 4 June 2004, a meeting of creditors of the defendant resolved that the defendant execute a deed of company arrangement; (c) on 25 June 2004, the defendant executed a deed of company arrangement accordingly, with Mr Lombe and Mr Greig as deed administrators; (d) pursuant to s.444D(1), the deed of company arrangement bound all creditors of the defendant in respect of claims arising on or before 8 March 2004; (e) the plaintiff is bound by the deed of company arrangement in respect of its claim for rent; and (f) the deed of company arrangement accordingly acts as an absolute bar and defence to the proceedings. 4 The plaintiff filed a reply on 14 December 2006. By that reply, the plaintiff (a) did not admit a number of matters going to the appointment of administrators and the adoption of the deed of company arrangement; (b) denied certain matters concerning the effect and operation of the deed of company arrangement (including, in particular, that the plaintiff became bound by the deed and that the deed is an absolute bar and defence to the claim); and (c) claimed that the defendant is estopped from relying on the deed of company arrangement as against the plaintiff. 5 It is in this context that the plaintiff wishes to amend the statement of claim by joining Mr Lombe and Mr Greig as parties (as well as a company called WCP Group Services Limited) and adding (along with some corrections or revisions of figures) facts and assertions to the following effect: (a) Mr Lombe and Mr Greig became deed administrators on 25 June 2004; (b) the plaintiff did not receive notice of the meeting of creditors referred to in the defence; (c) if the deed of company arrangement applied to the plaintiff, then, because the plaintiff did not receive the notice of meeting, "the plaintiff was deprived of the opportunity of voting at the meeting of creditors and of seeking to persuade other creditors to vote against the resolution to execute the deed, by reason of which matters the plaintiff ought to be excluded as a creditor bound by the deed". 6 The plaintiff also seeks to amend by adding a claim for an order as follows: "That the deed of company arrangement dated 25 June 2004 entered into between the first defendant [the company ACN 000 016 213 Pty Ltd], the second defendant [WCP Group Pty Limited], the third defendant [Mr Greig] and the fourth defendant [Mr Lombe] be varied by excluding the plaintiff as a creditor bound by the said deed." 7 The new claim is thus, in express terms, a claim for an order of the court varying the deed of company arrangement. That is the only new claim to which the plaintiff's application for leave to amend relates. I mention this because there was aired in argument the proposition that the plaintiff never became bound by the deed of company arrangement; but since that issue is not raised by the interlocutory process (which, as I say, refers only to the addition of a claim for an order varying the deed), there is no need for that proposition to be explored. 8 It was acknowledged by Mr Drew of counsel, who appeared for the plaintiff, that the claim for an order varying the deed of company arrangement would be advanced pursuant to either s.445G(4) or s.447A, they being provisions under which the court might conceivably make an order varying such a deed (see, in relation to the capacity of s.447A in that respect, Re Pasminco Ltd (2003) 45 ACSR 1). 9 The defendant opposes the application to amend. It contends that the proposed amendment is so obviously futile that the added content of the statement of claim would be liable to be struck out. 10 The defendant puts that contention on two bases. It points first to a deed of 20 December 2006 (which I shall call "the December deed" to distinguish it from the deed of company arrangement). The December deed is expressed to be a deed between Mr Greig and Mr Lombe of the one part and the plaintiff of the other part. The December deed recites that the defendant went into Part 5.3A administration on 8 March 2004, that they became deed administrators under the deed of company arrangement on 25 June 2004, that the plaintiff served a statutory demand on the defendant in October 2005 for unpaid rent and associated costs from July 2005, that an order setting aside the statutory demand was made on 11 July 2006, that the plaintiff alleged that Mr Greig and Mr Lombe were personally liable to it "in respect of certain representations made in relation to the lease", that the plaintiff had made "various allegations against" Mr Greig and Mr Lombe "in relation to their conduct as administrators in relation to the lease", that the plaintiff had agreed to release Mr Greig and Mr Lombe from those claims and that, as consideration, Mr Greig and Mr Lombe had agreed to pay $40,000 to the plaintiff. There follow operative provisions which (a) effected a release of Mr Greig and Mr Lombe by the plaintiff from "all present or future liability in respect of the Claims" (that is, all claims and liabilities existing at the date of the December deed "arising out of, connected with or in any way relating to the Lease, the voluntary administration of the Company, the DOCA and the events and matters described in the Proceedings", being the proceedings in which the statutory demand served on the present defendant by the present plaintiff was set aside); (b) excepted from that release, and preserved, action of the plaintiff to join Mr Greig and Mr Lombe as parties to proceedings "in which the only declarations and orders sought by [the plaintiff] against [Mr Greig and Mr Lombe] are declarations and/or orders to the effect that Kyle House is not bound by the DOCA and/or that the DOCA be varied only in so far as it applies to [the plaintiff]"; (c) Mr Greig and Mr Lombe agreed to pay $40,000 to the plaintiff, this being "consideration for the release if [Mr Greig and Mr Lombe] provided in this deed" and not "a payment of a dividend pursuant to the DOCA". 11 The second matter on which the defendant relies in resisting the application for leave to amend is the circumstance that there was lodged by the deed administrators with ASIC on 9 March 2007 an executed Form 5056 "Notice that deed wholly effectuated" bearing the same date. In the absence of evidence that the deed of company arrangement contained any provision displacing clause 12 of Schedule 8A to the Corporations Regulations 2001 (Cth) (see s.444A(5) and regulation 5.3A.06), it must be inferred that execution and lodgement of that form occurred because there had arisen a state of affairs described in that clause 12: "If the administrator has applied all of the proceeds of the realisation of the assets available for the payment of creditors or has paid to the creditors the sum of 100 cents in the dollar or any lesser sum determined by the creditors at a general meeting, the administrator must certify to that effect in writing and must within 28 days lodge with ASIC a notice of termination of this deed in the following form: 'X PTY LIMITED I, ( insert name and address ) as administrator of the deed of company arrangement executed on ( insert date ), CERTIFY that the deed has been wholly effectuated.',

and the execution of the notice terminates this deed, but nothing in this clause relieves the administrator of his or her obligations under clause 10 of this deed." 12 In deciding whether the amendment the plaintiff wishes to make to the statement of claim is obviously futile, the first question to be addressed is whether the December deed precludes the additional claim the plaintiff seeks to advance. I am not persuaded that it does. It is clear that the December deed concerned differences that had arisen between the plaintiff, on the one hand, and Mr Greig and Mr Lombe, on the other. Its subject matter was allegations against Mr Greig and Mr Lombe personally concerning their conduct as administrators in relation to the lease. Mr Greig and Mr Lombe personally agreed to pay the $40,000 to the plaintiff and, in return, they personally were released from all claims of the kind described. It follows that the December deed is of no relevance to the matters arising on this application and militates neither for nor against the grant of leave to amend. 13 I consider next the significance of the execution and lodgement of the Form 5056 on 9 March 2007. The provision of the deed of company arrangement in terms of clause 12 of Schedule 8A stated that execution of that form "terminates this deed": see the concluding words of that clause. The deed thus specified a circumstance in which the deed was to terminate, that is, the circumstance of execution of the form. By force of s.445C(c), therefore, the deed of company arrangement terminated when that circumstance came to exist - in other words, when the Form 5056 was executed. 14 That, it seems to me, must render futile the plaintiff's claim for an order in the terms set out at paragraph [6] above, being an order that the deed of company arrangement "be varied". The Corporations Act provides little guidance as to the meaning and consequences of termination of a deed of company arrangement. But the general concept of "termination", reinforced by s.445H, must lead necessarily to the conclusion that, after termination, there is no longer any deed of company arrangement capable of being "varied" (that being a concept recognised by ss.445A and 445G, among other provisions). 15 Following termination of a deed of company arrangement, the effects produced by the deed before termination continue to prevail (so that, for example, persons who have received distributions in accordance with the deed are entitled to retain them: Cresvale Far East Ltd v Cresvale Securities Ltd (2001) 37 ACSR 394 at p.438), but the deed provisions no longer have any operative force capable of grounding any further changes to rights and obligations (so that, for example, the deed administrator is discharged from office and has no further role to perform: Arcfab Pty Ltd v Boral Ltd (2002) 43 ACSR 573 at p.581). At that point, there is no longer extant any collection of presently operative provisions that can properly be regarded as a deed of company arrangement. 16 In the present case, there has not existed, since the termination effected by s.445C(c) on 9 March 2007, any deed of company arrangement capable of being varied, whether in the way contemplated by the additional order the plaintiff wishes to seek (see paragraph [6] above) or in any other way. Any order purporting to vary the relevant deed would accordingly be meaningless. 17 It may be that, notwithstanding the express terms of s.445H preserving the "previous operation of the deed", the comprehensive jurisdiction created by s.447A would support an order changing the "previous operation of the deed". That, however, is not a possibility that the plaintiff seeks to pursue on the present application, which is concerned only with variation of a deed of company arrangement. I therefore say no more about it. 18 The application for leave to amend must be dismissed but, of course, without prejudice to the right of the plaintiff to seek, on some future occasion, leave to amend in some other way. 19 In relation to costs, I am mindful that the execution of the Form 5056 - the event that, on my findings, made futile the particular amendment sought - occurred on 9 March 2007, that is, some seventeen days after the filing of the plaintiff's interlocutory process seeking leave to amend. In those circumstances, there may be a question whether costs of the interlocutory process should follow the event. I shall therefore make directions for the filing of submissions on costs. **********

Arcfab Pty Ltd v Boral Ltd

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Judgment (12 paragraphs)

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