Elfic Ltd v Macks

REASONS FOR JUDGMENT 1 This proceeding is an application under s 477(2B) of the Corporations Act 2001 seeking the approval of the court for Hookway Aerospace Pty Ltd (in liquidation) to enter into a deed of renewal of lease for the West Sale Airport, known as lot 29, West Sale Airport, Fulham, Victoria, the duration of which exceeds three months. Lot 29 is the location of an aircraft hangar situated at West Sale Airport. 2 The liquidator states in his affidavit of 19 May 2014 that: The lease of the hangar in addition to the hangar itself, is one of the remaining principal assets of the company. Other assets include a vacant block of land at Derwent Bridge in Tasmania and some other unspecified leased properties. 3 Section 477(2B) of the Corporations Act 2001 (Cth) provides: Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or an agreement under which a security interest arises or is created) if: (a) without limiting the terms of paragraph (b), the term of the agreement may end; or (b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance; more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months 4 The orders sought by the liquidator in the originating application are: 1. The approval of the Court for Hookway Aerospace Pty Ltd (in Liquidation) to enter in the Deed of Renewal of Lease in terms of the document annexed hereto and marked "A" (the Renewal) provided only that the Renewal is entered into contemporaneously with the Deed of Assignment of the Lease in the terms of the document annexed hereto and marked "B". 2. The Plaintiff's costs of this application be costs in the liquidation. 3. The Plaintiff have liberty to apply for further directions. 5 Justice Middleton on 19 December 2012 in proceeding number TAD 34 of 2012, ordered the winding up of Hookway Aerospace Pty Ltd and appointed Mr Hamilton as a liquidator of the company. The liquidator's solicitors have advised ASIC of this application but ASIC has chosen to take no part in it. The two directors of Hookway Aerospace Pty Ltd were Tamzin Peta Hookway and her brother, Stirling Matthew Hookway. 6 There is no requirement under the Corporations Act 2001 that creditors be served with an application under s 477(2B) and nor do the creditors have a right to be heard on the application: Elfic Ltd v Macks [2003] 2 Qd R 125 at 158-159. Nonetheless, in accordance with the usual practice of the court, I ordered on 13 June 2014 when this application was first before me that a copy of the originating process, the liquidator's affidavit in support and my order adjourning the application until today, be served by email on the two former directors of Hookway Aerospace Pty Ltd. 7 Subsequently an affidavit of service was filed by the plaintiff's solicitor on 27 June 2014 stating that this had been done. I now have a further affidavit sworn by the liquidator on 18 July 2014 and filed in court this morning, from which it appears that Ms Tamzin Hookway has no objection to the orders sought. Mr Stirling Hookway appeared in the body of the court today, although not seeking to be a party, and confirmed that in his view the outcome sought by the liquidator, whilst unfortunate, was probably the best that could be achieved in the circumstances. 8 I also note that the affidavit of service includes an indication that the documentation was served on other creditors - all other creditors - and none has sought to appear. Again, I emphasise that there was no requirement that anyone participate in these proceedings; they were served simply to alert them to the proceedings and give them an opportunity, if they thought appropriate, to seek leave to be heard on the application should they have thought they had reason to do so. 9 The liquidator's affidavit of 19 May 2014 sets out the background to this application. The original lease between the predecessors of the Wellington Shire Council as lessor and Hookway Aerospace Pty Ltd as lessee was for a term of 20 years ending on 31 April 2011 (which I observe is an obvious slip given that April has only 30 days). Mr Stirling Hookway, in his capacity as director of Hookway Aerospace, on 17 December 2010 wrote to Wellington Shire Council to exercise Hookway Aerospace's option to extend the lease for a further 20 years. The letter is annexed to the liquidator's affidavit of 19 May 2014. 10 The winding-up of Hookway Aerospace then intervened. Following his appointment in December 2012, the liquidator deposes that in August 2013, he appointed real estate agents to sell the hangar. He received three offers. The best offer was from Mr Stirling Hookway. Negotiations ensued but Mr Hookway then advised the liquidator that he was unable to purchase the hangar. The liquidator then approached Mr David Page, the party who had made the second best offer. The liquidator has negotiated with Mr Page a sale price of the hangar which is only slightly less than the sale price offered by Mr Hookway. 11 The Court "generally will not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct": Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 86. 12 There is nothing in the material before the Court that is a ground for doubting the prudence of the liquidator's conduct. To the contrary, the liquidator would seem unlikely to be able to sell the hangar without securing a renewal of the lease. While the terms of the renewal of the lease are for a further 20 years, in reality Hookway Aerospace Pty Ltd (in liq) will be the lessee under the renewed lease only momentarily. The liquidator has made it clear in his affidavits and in the originating process that the deed of renewal is to be entered into at the same time as the deed of assignment assigning the interests of Hookway Aerospace Pty Ltd (in liq) under the lease to the new tenants associated with Mr Page. These will be Mr David Anthony Page, Sale Aviation Services Pty Ltd and Andrea Gay Page as trustee for the Page Family Trust. 13 The court generally grants approval under s 477(2B) only where the transaction is the proper realisation of the assets of the company, or otherwise assists in the winding up: Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26]; Warne v GDK Financial Solutions; Peridon Village Nominees (2006) 24 ACLC 1,019 at [58]. In a draft order handed up in court on 13 June 2014, the plaintiff identified some minor changes required to the annexures that were relevant to the approval sought. I need not go through those matters because they have been addressed in the hearing today and this morning. 14 Revised documents correcting a number of minor typographical and other similar errors have been provided to the court. As those documents are not currently on file, I propose initialling them and placing them on the file so there is a permanent record of what the court has approved. Accordingly, the orders of the court are that: 1. Approval is granted to the plaintiff to enter into the deed of renewal of lease in terms of the document marked "A" and initialled by me and placed on the court file, contemporaneously with a deed of assignment of the lease in the terms of the document marked "B" and initialled by me and placed on the court file. 2. The plaintiff's costs of the application be costs in the liquidation. 3. The plaintiff have liberty to apply for further directions. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kerr.