Bamco Villa Pty Ltd v Montedeen Pty Ltd [2002] VSC 184

[9]

In this case I am satisfied that the conditions of sub-sections 445D(1)(e), (f) and (g) have been established. On 18 October 2001 Mr R. Cauchi and Mr D. Lofthouse were appointed joint and several administrators of Montedeen. That appointment had been preceded by the service upon Montedeen of a creditor's demand by Bamco. On 7 December 2001 Mr Lofthouse prepared a report to creditors in which he informed them of a number of matters and made certain recommendations. The 7 December 2001 report records that the first meeting of creditors of the company had been held on 25 October 2001 in accordance with section 436E but that a committee of creditors was not formed. The second meeting of creditors was originally convened for 15 November 2001 but was adjourned to permit the formulation of a proposal for a deed of arrangement and for other investigations to be undertaken. The 7 December 2001 report also informs the creditors, on its first page, that many of the relevant records which had been sought had only been provided on 7 December 2001 and that "as such", its author, Mr Lofthouse, had "had little opportunity to review them prior to completing" the report. It is significant that the administrator making recommendations to creditors commences a report to them with an express assertion that information relevant to the recommendations to be considered at the meeting had not been obtained until recently, and that he, as the person whose statutory task it was to make recommendations to them, had had insufficient opportunity to consider the information. In other words that the person charged with important statutory functions for the benefit of those who were due to consider the report was stating that as at 7 December 2001 relevant information had only recently been supplied, that it had not been fully considered, that there was not then a recommendation from the administrators to adopt the proposal and that more time was sought by the administrators to consider, report and recommend.

[12]

There were 14 creditors present at the meeting by proxy. Six were represented by Mr Stavropoulos. Four, including CLA, were represented by Mr Wunsch. Bamco was represented by Mr Champion. Westminster Finance ("Westminster") was represented by its solicitor Mr Brereton and Mr Duchini represented Brighton Classic Cars and Terry Hogan Prestige Cars Pty Ltd. All but Bamco voted in favour of the deed of arrangement which had been put only two days earlier. A number of those creditors participated in this proceeding to support the deed of arrangement. All of them were represented by Mr Brereton's firm. Significantly, the acceptance of the proposal on 14 December 2001 effectively rejected the entirely reasonable recommendation of Mr Lofthouse to be given a relatively short time for him, as administrator, to consider the proposal and properly to report to the creditors. In other words, the majority of the creditors voted against a clear request from the independent administrator that he as the independent person charged by law to make recommendations be permitted less than one month during the Christmas period to do no more than to consider the proposal so as to discharge his duty to report. Such circumstances might be discounted if it might confidently be said that the majority of the creditors were fully informed about what they were voting upon, but the evidence before me indicates plainly that that was not so. Mr Stavropoulos was a director of one of the creditors and had a proxy for five others. Those creditors were essentially six of the franchisees who had obtained their initial franchise through Montedeen. The nature of their debts was not fully explored, but for present purposes I may assume that each was properly admitted in full. Mr Stavropoulos himself now holds the position of consultant for Europcar which is connected with Montedeen and its director, Mr Salvo, and their related companies. Mr Stavropoulos had a poor recollection of the meeting of 14 December 2001 and could not recall that Mr Lofthouse had asked for an adjournment, and gave evidence that he did not know that only seven days before the meeting there had been a proposal for the payment of fifty cents in the dollar. The direct evidence of Mr Stavropoulos clearly establishes in my mind that the vote of the creditors he represented was not an informed vote or decision. There was also an element of indifference to the debts owed to his company and to the others he represented. A similar attitude was evident in relation to the debt claimed by Mr Duchini's company. His evidence was that he had effectively given up, and written off, the debt. Mr Duchini also could not recall the earlier proposal to pay fifty cents in the dollar.

[18]

Bamco also relies upon section 447A for the orders it seeks. It may be undesirable for me to express concluded views about some of the matters relied upon in this context because some are matters which were not fully explored in the evidence before me and, in any event, are matters properly for the administrator or liquidator to consider after full and proper investigation. In that regard I have in mind the contention that Montedeen is insolvent, as well as the arguments concerning the debt due to Montedeen from Grovedew Pty Ltd and concerning the debt due by Montedeen to Westminster. In relation to the debt due to Westminster it may be sufficient to note, first, that the administrator's report to creditors of 7 December 2001 identified it as one which required further investigations. Secondly, I should express my doubt about the view expressed in evidence by Mr Brereton concerning the legal effect of certain contractual provisions upon which the debt to Westminster depends. Little turns upon whether the legal effect of certain provisions are accurately described by such labels as "non-recourse loans". However, my preliminary view of the obligations assumed by Westminster was that it was to procure and maintain a performance bond or other undertaking sufficient to secure the advance during the entire term of the loan. This obligation was one which Westminster seemed to have assumed at the outset of the arrangement and from which it may not have been relieved. It was an express term of the agreement between Montedeen, through a partnership, and Westminster, that the failure to maintain the performance bond gave Montedeen a right of set off against Westminster. Westminster's debt may, therefore, be reduced to nil or to a lot less than the claim. These are all matters to be investigated in the future and the denial of time to investigate them points to another reason for the need to terminate the deed of arrangement. It is possible that a full examination of the matters which the administrator wished to examine would lead to the conclusion that some of the debts admitted for the purposes of the meeting of creditors are not owing, or not owing in the amounts claimed; if that is so, Bamco may have been unfairly prejudiced at the creditors meeting because its vote carried a smaller percentage of the total votes than it should have had.

Bamco Villa Pty Ltd v Montedeen Pty Ltd [2002] VSC 184 - VSC 2002 case summary — Zoe

At a glance

Court

Decision date

Before

Source

Judgment (24 paragraphs)

Parties

Cases Cited (2)