Dellara Pty Limited (subject to a deed of company arrangement) (receiver appointed) v Geoffrey Philip Reidy in his capacity as deed administrator of Dellara Pty Limited
[2015] NSWSC 2044
Supreme Court of NSW|2015-04-02|Before: Brereton J
HIS HONOUR: By notice of motion filed on 26 March 2015, the applicant/defendant Geoffrey Philip Reidy, who is the deed administrator of the company Dellara Pty Ltd, seeks an order that the respondent/plaintiff Dellara Pty Ltd, of which Graham Peter Hill is the receiver appointed by a secured creditor, produce to the defendant copies of documents specified in the schedule, as follows:
1. All deeds, agreements and other documents to which Dellara Pty Ltd (Subject to Deed of Company Arrangement) (Receiver Appointed) (the Company) is named as a party and which has executed on or after 5 November 2014, including but not limited to:
(a) All documents which comprise an amendment to, or seek to affect the operation of, the deed of release dated 6 May 2014 between Geoffrey Reidy, the Company, Michelle Miller, Roderick Miller, Armadello Constructions Pty Limited, Armadello Pty Limited, Roderick Holdings Pty Limited and Patons Lane Pty Limited.
(b) All documents which comprise an amendment to, or seek to affect the operation of, the contract for sale of land dated 6 May 2014 between the Company and SRC Properties Pty Ltd (SRC) entered into for the sale of the Company's property at 123-179 Paton's Lane Orchard Hills New South Wales (Folio Identifier 40/738126) (the Property).
2. All documents after 6 May 2014 recording the distribution of funds from SRC to Michelle Miller at any time whatsoever including funds distributed on, before or after settlement of the sale of the Property to SRC on 2 March 2015 and including but not limited to:
(a) Cheque directions by the Company to SRC.
(b) All cheques that were handed over by SRC at settlement on 2 March 2015.
(c) All settlement statements prepared for the settlement on 2 March 2015.
As I have said, Mr Reidy is the deed administrator of Dellara under a deed of company arrangement dated 5 October 2012. That deed provided, by clause 3.1, that the property available to meet creditor's claims is:
The company's property specified in item 10 of the schedule remaining after the rights and entitlements of secured creditors of the company are satisfied. The creditors are entitled to be paid under this deed from the deed administrator's realisation of all such property after satisfaction of the rights and entitlements of secured creditors.
Clause 6 of the deed provided that, "for the purposes only of administering this deed", the deed administrator have the enumerated powers, including relevantly:
(s), to sell, call or convert to money any of the property of the company to apply the money in accordance with this deed, and otherwise effectively and properly to carry out his or her duties as deed administrator;
(ag), to do anything that is incidental to exercising of powers set out in this clause;
(ah), to do anything else that is necessary or convenient for the purposes of administering this deed; and
(af), to inspect, review and copy any book or record of the company.
Pursuant to (Cth) Corporations Act 2001, the deed is binding on the company, the deed administrator, the creditors and the company's officers. In the schedule, item 10 describes the property available as "All of the assets of the company including but not limited to its land located at Paton's Lane, Orchard Hills...".
On 22 April 2014, Mr Reidy and the company executed a deed of acknowledgement which recited that, at an adjourned meeting of creditors on 17 September 2012 pursuant to Corporations Act, s 439A, the creditors had voted in favour of executing a deed of company arrangement, and that at a meeting of creditors convened under s 445F on 3 April 2014, the majority of creditors resolved pursuant to s 445A that the DOCA be varied. The deed of acknowledgement then provided that at the s 445F meeting on 3 April 2014, the DOCA was varied pursuant to s 445A, in substance to allow the company to accept an offer made by SRC Properties Pty Ltd for the Orchard Hills land for a price of $8,175,000, notwithstanding that it might not be the best price obtainable, and conditional upon a secured creditor, Michelle Miller, agreeing to cap her claim against the company to $7 million and releasing the deed administrator and the company from all amounts in excess thereof.
On 6 May 2014, Mr Reidy, the company, Ms Miller, and a number of her related entities executed a deed of release by which Ms Miller agreed that, if and only if the conditions precedent were satisfied by the due dates specified or extended, and with effect from the last of those dates, she released and forever discharged the company and the administrator from all claims whatsoever arising from or in connection with her proof of debt or the liability she claimed against the company or her security interests and released the property from that interest. The relevant conditions precedent were that the contract for sale between the company, the deed administrator and SRC providing for a purchase price of $8.59 million be executed, exchanged and completed by the completion date, which was defined as the completion date under the sales contract being four months after its exchange or such date as the parties to the sales contract might agree in writing in accordance with its terms and with her prior written consent. Clause 4.2 provided that if any of the conditions precedent were not satisfied by the due date, any party to the deed of release would be entitled to rescind it by written notice to all others.
There is no evidence that any attempt was made to rescind the deed of release. SRC did not complete the purchase of the Orchard Hills property on the completion date nominated in the contract. On 5 November 2014, Ms Miller appointed Mr Hill as receiver pursuant to a charge over the assets and undertaking of the company that she had acquired from St George Bank, having paid out the company's liability to St George. As receiver, Mr Hill took over the conduct of the sale from Mr Reidy. Mr Hill issued a notice to complete. SRC did not complete in accordance with the notice, but the receiver did not terminate the contract.
Following the appointment of the receiver, Mr Reidy claimed a lien on the property (or its proceeds of sale) of the type described by Dixon J in Re Universal Distributing Co Ltd (in liquidation) (1933) 48 CLR 171, and lodged a caveat in respect of the Orchard Hills property to secure that claim. Mr Hill then commenced these proceedings for removal of the caveat in order to enable the sale to proceed. Those proceedings were ultimately settled upon an undertaking by Mr Hill to pay part of the proceeds into court.
Mr Hill included in his initiating process a claim to the effect that the Court assess and limit the administrator's costs. Mr Reidy has foreshadowed a cross-claim for relief to give effect to a universal distributing lien. Before that cross-claim was formulated and pleaded, the sale of the Orchard Hills property was completed on 2 March 2015. The proceeds of sale have been paid in part to the company, presumably in the care of the receiver, of which part has since been paid into Court pursuant to the undertaking to which I have referred. Some of the proceeds were paid to or at the direction of Ms Miller. Others were paid in ordinary adjustments.
A question arises as to whether Ms Miller has received more than $7 million from the proceeds and, if so, whether she is entitled to do so. It may well be that defaults in meeting completion dates and conditions mean that she was entitled to, but I simply do not know at this stage; nor can the administrator know. The way in which the proceeds have been distributed distinctly leaves open the possibility that she has negotiated to receive a sum in excess of $7 million, to which she may or may not be entitled against the deed administrator.
Since before the settlement of the sale, the deed administrator has requested some information about the status of the contract. Since completion, the deed administrator has made repeated requests for provision of documentation which would illuminate the disposition of the proceeds of sale and the basis on which they have been distributed. The receiver has declined every request to produce those documents. It is in that context the present application is brought.
Although brought by notice of motion in the proceedings, that is apparently because, although these are now Corporations List proceedings in which any further application concerning the same company might be made via interlocutory process, their origin as a general list matter meant that, for one reason or another, an interlocutory process would not be received in the registry and a notice of motion was insisted upon. That should not be allowed to camouflage the fact that the relief presently claimed is sought as principal relief, and alternatively as ancillary relief in the proceedings that are already pending.
So far as the claim is made as ancillary relief in the proceedings already pending, it may seriously be doubted whether the documents production of which is sought are really relevant to the claim for relief of the kind referred to in Re Universal Distributors. However, it seems to me clear that, on a number of bases, the administrator is entitled to production of the documents sought.
The first and clearest of these is pursuant to the deed of company arrangement, which, as I have said, binds the company and its officers, which - by reason of the definition in Corporations Act, s 9 - include a receiver as well as the deed administrator. Clause 6(af), to which I have referred, empowers the deed administrator to inspect, review and copy any book or record of the company. As counsel for the receiver points out, clause 6 is conditioned upon the words "for the purposes only of administering this deed". However, clause 3.1, to which I have also referred, makes clear that the property available to meet creditors' claims is the company's property specified in item 10 - that is to say including the Orchard Hills property - "remaining after the rights and entitlements of secured creditors of the company are satisfied". It seems to me as plain as can be that the documents sought are relevant to ascertaining what is the available property, namely the proceeds of the Orchard Hills property after the rights and entitlements of secured creditors are satisfied. They are sought in order to enable the deed administrator to ascertain what are the rights and entitlements of the secured creditors and how the proceeds of sale were disbursed so as to enable a conclusion to be reached as to what remains after satisfying the proper rights and entitlements of secured creditors. I do not think this is capable of serious dispute. Accordingly, the DOCA gives the deed administrator a right, legally enforceable against officers of the company, including the receiver, to inspect the documents or copies of them. The notice of motion seeks to enforce that right.
Alternatively, the right may be supported on the basis of an application for preliminary discovery. The deed administrator wishes to ascertain whether he should commence proceedings requiring the receiver and/or Ms Miller to account for the proceeds that they have received from the Orchard Hills property on the footing that they may have received more than the amount to which they are properly entitled. (NSW) Uniform Civil Procedure Rules 2005, r 5.3, makes provision in respect of preliminary discovery. The relevant principles were stated by McColl JA in Hatfield v TCN Channel 9 Pty Ltd [2010] NSWCA 69, [47]-[52]. Notably, they include (at [51]) that the question is not whether the applicant has sufficient information to decide if a cause of action is available, but whether the applicant has sufficient information to make a decision whether to commence proceedings, and thus that an applicant may be entitled to preliminary discovery in order to determine what defences are available to the respondent and the possible strength of those defences.
What rights any of the deeds production of which is sought by the motion give Ms Miller may well illuminate what defences are available to her, and whether there is a proper legal basis for her to receive more than $7 million - if she did in fact receive more than $7 million. As McColl JA pointed out, preliminary discovery is not precluded by the fact that the applicant already has available evidence establishing a prima facie case, because there may be matters of defence which could defeat a prima facie case.
It was submitted that an application for preliminary discovery had not been sufficiently "set up", in that there had not been a prior request for production of documents in precisely the same terms as sought in the notice of motion. But there have been repeated requests for substantially the same documents, or classes of documents, in broadly the same though not in literally identical terms. Some of the earlier requests were narrower, and they were steadfastly refused. It is spurious to suggest that a broader request had to be made before making an application for preliminary discovery. There is no requirement in the rules for any prior request, let alone for precise correlation, and while it is plainly sound practice and relevant to the exercise of discretion that some request for production has been made in the circumstances of this case, the absence of precise correlation between repeated requests and the ultimate application is immaterial.
If those two grounds were not sufficient to maintain the application, it seems to me that the deed administrator would plainly be entitled to examine the receiver pursuant to (Cth) Corporations Act, s 596A, and to require production of the documents in conjunction with the examination pursuant to s 596D. While (NSW) Civil Procedure Act 2005, s 68, can be used in conjunction with an examination summons to obtain production of documents for use on an examination from a person other than an examinee, it has been suggested that there must be a particular examination to which the s 68 order relates for that purpose, and as no application has been made at this stage for an examination summons, the source of power may not be available; but as there are other bases upon which I can decide this application, it is unnecessary to pursue that question further. However, insofar as discretion and timing is concerned, it seems to me that the plain entitlement of the administrator to obtain these documents, if necessary, pursuant to s 596D, is of some guidance.
Ultimately, those matters are also relevant to the argument of prematurity. If this were an application for discovery, or by way of disclosure in pending proceedings and no more, Practice Note SC Eq 11, which ordinarily defers disclosure until after closure of the evidence, might be relevant. But that does not apply to a claim to be entitled to documents as of right, nor to an application for preliminary discovery. Nor would it apply on an examination under s 596A and the associated requirement for production under s 596D. It needs to be borne in mind that deed administrators, like liquidators, are often in a position of significant disadvantage in the institution of legal proceedings, and that they are given the powers under s 596A to endeavour to enable them to make informed decisions. That policy also informs the attitude one takes to an application for production by such a litigant in proceedings.
In any event, for the reasons I have given, I am satisfied that the deed administrator is entitled to production of the documents sought.
The Court orders that:
1. The plaintiff, by its receiver, Graham Peter Hill, produce to the defendant within seven days true copies of such of the following documents as are in his possession, custody or power:
1. all deeds, agreements and other documents to which Dellara Pty Ltd (subject to a deed of company arrangement) (receiver appointed) ("The Company") is named as a party and which were executed on or after 5 November 2014, including but not limited to:
1. all documents which compromise an amendment to or seek or affect the operation of the deed of release dated 6 May 2014 between Geoffrey Reidy, The Company, Michelle Miller, Roderick Miller, Armadello Constructions Pty Ltd, Armadello Pty Ltd, Roderick Holdings Pty Ltd, and Patons Lane Pty Ltd;
2. all documents which comprise an amendment to, or seek to affect the operation of the contract for sale of land dated 6 May 2014 between The Company and SRC Properties Pty Ltd ("SRC") entered into for the sale of The Company's property at 123-179 Paton's Lane, Orchard Hills, New South Wales, folio identifier 40/738126, ("The property");
1. all documents after 6 May 2014 recording the distribution of funds from SRC to Michelle Miller at any time whatsoever including funds distributed on, before or after settlement of the sale of the property to SRC on 2 March 2015, and including but not limited to:
1. cheque directions by The Company to SRC;
2. all cheques that were handed over by SRC at settlement on 2 March 2015; and
3. all settlement statements prepared for the settlement on 2 March 2015;
1. The respondent/plaintiff pay the applicant's costs of the notice of motion on an indemnity basis;
2. The respondent/plaintiff not be entitled to have recourse to the assets of the company for the purposes of meeting that costs order, or meeting his own costs of this motion, without prejudice to his right to be indemnified by his appointor.
[3]
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Decision last updated: 26 February 2016
Parties
Applicant/Plaintiff:
Dellara Pty Limited (subject to a deed of company arrangement) (receiver appointed)
Respondent/Defendant:
Geoffrey Philip Reidy in his capacity as deed administrator of Dellara Pty Limited