Curtis v Goodin

COLVIN J: 1 Each of the plaintiffs is the owner of a unit within the building at 251 Hay Street, East Perth in Western Australia. They each claim to be entitled to the long term lease of a car bay in a separate building at 199 Hay Street. When units in the 251 building were first offered for sale, a number of them were advertised as having an associated car bay at the 199 building. It was in those circumstances that the lease agreements were first arranged. They were each for terms of 99 years. 2 Torcrest Developments Pty Ltd (in liq) is the owner of a strata lot which forms part of the 199 building known as Lot 2. Mr Peter Goodin is the liquidator of Torcrest which has been in liquidation for many years. Lot 2 of the 199 building is the only asset of Torcrest. Until recently it was the subject of a mortgage, but the mortgage has now been discharged. There are a number of car bay leases that are encumbrances on Lot 2 of the 199 building. Mr Goodin has attempted to sell Lot 2 of the 199 building but has been unable to do so because of the car bay lease encumbrances. He has deposed to his view that for Lot 2 to be realised for a worthwhile amount it needs to be sold to a prospective developer as part of a sale of the whole of the property at 199 Hay Street. 3 Currently, there appear to be 26 leaseholders of car bays that form part of Lot 2. They include or are claimed to include the plaintiffs. Last year Mr Goodin caused disclaimer notices to be issued with the intention of disclaiming all of the car bay leasehold interests in order to facilitate the sale of Lot 2. The plaintiffs then disputed the disclaimer notices and sought declaratory relief as to the invalidity of the notices or orders setting them aside. 4 The dispute with the plaintiffs has been resolved provisionally on terms that would result in new car bay leases that would allow for the redevelopment of Lot 2 and therefore facilitate a sale of the whole of 199 Hay Street. The proposed new leases would be for a term of 86 years. It is anticipated that the implementation of the proposed settlement may take more than three months. Therefore, Mr Goodin requires approval under s 477(2B) of the Corporations Act 2001 (Cth) both for the settlement agreement and the proposed new leases. 5 Mr Goodin has deposed to his belief that if settlement was to be approved and the proposed leases entered into then 199 Hay Street becomes a viable development opportunity and a sale to a developer of Lot 2 is more likely such that there is a real prospect that it will be possible to sell the whole of 199 Hay Street in the medium term if all the car bay leases include a redevelopment clause. On the other hand, Mr Goodin has deposed that if the application by the plaintiffs challenging the disclaimer notices was to succeed then that would severely adversely impact the prospects of negotiating a sale of the whole of 199 Hay Street to a developer and consequently upon the price that might be obtained for Lot 2. 6 In Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26], Gordon J summarised the principles relevant to the exercise of the Court's power under s 477(2B). The application must be made for the purposes of the winding up. Generally that will mean that the proposed agreement must facilitate the orderly realisation of the assets of the company. The Court does not consider whether to approve the agreement, but rather whether to permit the liquidator to exercise the judgment entrusted to the liquidator in a particular way. The Court will generally not interfere unless there is a real and substantial basis for doubting the prudence or propriety of the liquidator's proposal. The Court must pay due regard to the liquidator's commercial judgment and knowledge of the circumstances of the liquidation. The terms of the agreement must be clear. The summary has been adopted subsequently: Re The Bell Group Ltd (in Liq) [2009] WASC 235 at [57] (Hasluck J); In the matter of One.Tel Limited [2014] NSWSC 457 at [26] (Brereton J); Lewis & Templeton & Warehouse Sales Pty Ltd (in liq) v LG Electronics Australia Pty Ltd (No 2) [2016] VSC 63; (2016) 48 VR 450 at [114] (Sifris J); and Re Red Lancer Pty Ltd (in liq); Ex parte Bumbak [2019] WASC 450 at [49]. To similar effect is the more recent summary by Gleeson J in Hurst, in the matter of Liquor National Pty Ltd (in liq) [2019] FCA 1581 at [15]-[20]. 7 Approval should be sought before entering into the agreement, but retrospective approval may be given: Vickers, in the matter of York Street Mezzanine Pty Ltd (in liq) [2011] FCA 1028; (2011) 196 FCR 479 at [27] (Gordon J). 8 I am satisfied that the settlement agreement and the leases are to be entered into in order to advance the effective realisation of Lot 2, particularly by introducing the redevelopment clause. The terms of the proposed agreements are before me and are therefore certain. They are not proposed for the purpose of earning income during the course of the liquidation, a course that would be problematic unless it was undertaken to enhance the sale value of a property by securing a long term tenant. There is no suggestion of some impropriety, lack of good faith or error of principle in the approach adopted by Mr Goodin. The commercial basis for the agreements has been explained. 9 Therefore, I am satisfied that the agreements should be approved even though, in the particular circumstances, they contemplate car lease agreements of very long duration. I will make orders as sought on the application. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.