Barnden, in the matter of Millrange Pty Ltd (in liq) [2021] FCA 415 - FCA 2021 case summary — Zoe

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Barnden, in the matter of Millrange Pty Ltd (in liq) [2021] FCA 415

[2021] FCA 415

Federal Court of Australia|2021-04-28|Before: Jagot J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2021-04-28

Before

Jagot J

Source

Original judgment source is linked above.

Judgment (2 paragraphs)

[1]

Pursuant to s 579E of the Corporations Act 2001 (Cth) (Act), Millrange Pty Ltd (In Liquidation) (Millrange) and Lifestyle Fitness Centre Australia Pty Ltd (In Liquidation) (Lifestyle) are a pooled group (the Pooled Group) for the purposes of section 579E of the Act.
Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) 2016, the plaintiff may comply with his obligations under reg 5.6.65(1)(b) of the Corporations Regulations 2001 (Cth) in relation to the notice of intention to declare a dividend for the Pooled Group (Notice) by: (a) publishing the Notice in the Australian newspaper; (b) displaying the Notice on the website of Rodgers Reidy; (c) providing the Notice to Fitness Playground (M & E) Pty Ltd within seven days of the date of these orders and requesting that it be displayed at Fitness Playground Erskineville (Level 1, 672 King Street, Erskineville NSW) and Fitness Playground Marrickville (Units 7 and 8, 258-272 Illawarra Road, Marrickville NSW) for a period of at least 28 days; (d) providing the Notice to Hardcore Gym Pty Ltd within seven days of the date of these orders and requesting that it be displayed at Hardcore Gym Carlton (290-296 Railway Parade, Carlton NSW) for a period of at least 28 days; and (e) transmitting the Notice by email to each known creditor of Millrange and / or Lifestyle for whom an email address is known.
The plaintiff's costs of and incidental to this application be costs in the winding up of the Pooled Group and paid from the pooled assets of the Pooled Group. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[2]

JAGOT J: 1 The plaintiff has applied for: (1) a pooling order under s 579E(1) of the Corporations Act 2001 (Cth) (the Act) (the pooling order); and (2) an order that the Liquidator is justified in complying with his obligations under reg 5.6.65(1)(b) of the Corporations Regulations 2001 (Cth) (the Regulations) by taking certain steps in relation to a notice of intention to declare a dividend (the notice order). 2 I will refer to Millrange Pty Ltd (in liquidation) (ACN 105 408 482) (Millrange) and/or Lifestyle Fitness Centre Australia Pty Ltd (in liquidation) (ACN 155 956 059) (LFC) as the Companies. 3 Pursuant to s 579E(11) of the Act, the plaintiff as the liquidator of each of the Companies may apply for the pooling order. 4 By s 90-20(1)(d) of the Insolvency Practice Schedule (Corporations) 2016 in Sch 2 of the Act, the plaintiff is an officer of each of the Companies and may apply for the notice order. 5 No creditor or other interested party appeared at the hearing to oppose the orders sought, despite notice of the hearing being given by the plaintiff as ordered by the Court. While it is clear that the plaintiff has not been able to notify all creditors of the Companies, there can be no doubt that he has faithfully tried to do so and that his inability to do so is a result of the lack of contact details for some creditors. In Natkunarajah (Liquidator), in the matter of FLY365 Pty Ltd (in liquidation) [2020] FCA 419 at [40] Gleeson J said: …there is authority that, if an obligatory requirement in an Act cannot be complied with for some reason beyond the control of the person upon whom the duty is imposed, the obligation will not be insisted upon: D Pearce, Statutory Interpretation in Australia (9th ed, Lexisnexis Butterworths Australia, 2019), [11.28], referring to R v Leicestershire Justices (1850) 15 QB 88; 117 ER 391. 6 I adopt the same approach in the present case to the requirement for notification of the declaration of a dividend in reg 5.6.65(1) of the Regulations. 7 Section 579E(1) of the Act provides: If it appears to the Court that the following conditions are satisfied in relation to a group of 2 or more companies: (a) each company in the group is being wound up. (b) any of the following subparagraphs applies: (i) each company in the group is a related body corporate of each other company in the group; (ii) apart from this section, the companies in the group are jointly liable for on or more debts or claims; (iii) the companies in the group jointly own and operate articular property that is or was used, or for use, in connection with a business, a scheme or an undertaking, carried on jointly by the companies in the group; (iv) one or more companies in the group own particular property that is or was used, or for use, by any or all of the companies in the group in connection with a business, a scheme, or an undertaking, carried on jointly by the companies in the group; the Court may, if the Court is satisfied that it is just and equitable to do so, by order, determine that the group is a pooled group for the purposes of this section. 8 The pooling order sought relates to Millrange and LFC, each of which is being wound up pursuant to a creditors' voluntary winding up process. 9 The plaintiff relied on s 579E(1)(b)(iv) of the Act. According to the plaintiff, the Companies owned property that was used in a business consisting of the operation of three "Lifestyle Fitness Centres" at three locations in Sydney. The plaintiff also noted that "a single business enterprise fulfilling the intent of section 579E of the Act will be found to exist where there is an 'aggregation of separate efforts in juxtaposition to one another' or the independent conduct of activities by one company performed in conjunction with activities of the other: Allen v Feather Products Pty Ltd (2008) 72 NSWLR 597 at 600-601". 10 The plaintiff submitted that it was just and equitable for the Court to make the pooling order because: (a) The Companies owned or operated property that was used in connection with the Business: s579E(1)(iv) of the Act: First Affidavit [45]-[47]; (b) Prior to the liquidation, the activities and business of the Companies were heavily intermingled, including bank accounts, employees, and the accounts/records of the Companies: First Affidavit [48]-[57]; (c) Creditors of LFC will be advantaged in that they may receive a dividend if the Pooling Application is granted, but are otherwise not expected to receive any dividend: First Affidavit [43], [60]-[61]; (d) Creditors of Millrange may receive a slightly lower dividend than if the Pooling Application is not granted. However, the Liquidator submits that such minor disadvantage does not detract from it being just and equitable to make the Pooling Order in circumstances where: (i) the LFC debt of $200,000 is not taken into account (pursuant to s579E(2)(b) of the Act), with the resultant increase in the pool for creditors; (ii) the expected dividend is not substantially lower (a range of between 2.81 and 17.48 cents as opposed to a range of between 4 and 22 cents); (iii) Two of LFC's creditors (Kamper Chartered Accountants and the ATO) are also creditors of Millrange, such that any lowering of the dividend of Millrange will be offset in part by the declaration of a dividend in respect of LFC. 11 In In the matter of Kirby Street (Holding) Pty Limited [2011] NSWSC 1536 at [40] Barrett J said: The questions for the court are thus whether, at the time of the court's decision, particular property "is or was used, or for use" in a relevant way and is property that "one or more companies in the group own". The inquiry into use directs attention to both the present (whether the property "is ... used, or for use") and the past (whether the property "was used, or for use"). The inquiry into ownership, by contrast, concentrates wholly on the present - whether one or more of the relevant companies "own" the property at the time of the court's decision. 12 The tangible assets of the Companies were sold before they were placed into liquidation. However, there remains a bank account in the name of Millrange which is in credit in the amount of some $287,000. The chose in action of Millrange in respect of that bank account is property which Millrange owns. Further, there is evidence that the funds of the Companies were heavily intermingled in the carrying out of the business. On this basis, one of the Companies owns particular property that is or was used, or for use, by any or all of the Companies in the group in connection with a business as required by s 579E(1)(b)(iv) of the Act. 13 I am not satisfied that the making of the pooling order would materially disadvantage any eligible unsecured creditor as provided for in s 579E(10) of the Act. I am satisfied that it is just and equitable that the poling order be made. I am also satisfied that it is appropriate that the notice order to be made. Orders will be made accordingly. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jagot.