Gibbins Investments Pty Ltd v Peko Bull Pty Ltd

O'CALLAGHAN J 1 This is an application by the applicant, Gibbins Investments Pty Ltd, made pursuant to s 440D of the Corporations Act 2001 (Cth) (the Act), for leave to proceed against the three corporate respondents to the proceeding, Peko Bull Pty Ltd (Peko Bull), Elmore Ltd and Sitzler Savage Pty Ltd (Sitzler Savage). 2 On 6 February 2024, Messrs Jones, Woods and Joseph of KPMG were appointed voluntary administrators to each of those three corporate respondents. On 16 February 2024, Messrs Tucker and Bumbak, of KordaMentha, were appointed as receivers and managers to those companies. 3 The applicant read two affidavits of Ms Gessica Luana Giordano, affirmed 7 May and 13 August 2024, respectively. Ms Giordano is a solicitor of P&B Law, solicitors for the applicant. 4 It is necessary to set out a small amount of detail about some of the agreements that form the basis of the proceeding. 5 On 10 November 2017, the applicant and Peko Bull entered into three agreements. One granted the applicant the right, title and interest in 100 per cent of the shares in Sitzler Savage as security for payment by Peko Bull of a periodic payment right. The applicant and Peko Bull also entered into: (a) a royalty deed in respect of royalties to be paid to the applicant for magnetite sales from the Peko Tailings Project; and (b) a royalty deed in respect of royalties to be paid to the applicant for gold production from that project. 6 This proceeding was commenced on 13 July 2023. By its amended statement of claim dated 21 December 2023, the applicant alleges (among other things) that Peko Bull has failed to pay royalties owed under the deeds, and breached or repudiated these agreements. 7 On 12 September 2023, Beach J made orders in the proceeding, which relevantly and in summary provided that Peko Bull should not sell, transfer, assign, charge, mortgage, encumber, impair or otherwise deal with or dispose of any and all shares it held in Sitzler Savage, and that by the next day, Peko Bull was to deliver to the applicant's solicitors all share certificates concerning shares held by Peko Bull in Sitzler Savage, and any signed share transfer forms in favour of the applicant executed by Peko Bull in respect of the shares in Sitzler Savage held by Peko Bull. The forms were to be held in escrow by the applicant until further order. 8 That order also provided that Sitzler Savage should not sell, transfer, assign, charge, mortgage - and so on - any of its own shares or issue any new shares, and that it should not enter any change in or process or effect any transaction on its share registry, except to note that the applicant holds 100 per cent of the share certificates of Sitzler Savage. It further provided, at paragraph 5(c), that Sitzler Savage should not sell, transfer, assign, part with the benefit of, part with possession of, or otherwise permit removal by any person of any part of the land, fixtures or chattels, or product of the "Peko Tenements" as defined. 9 On 15 September 2023, his Honour varied paragraph 5(c) of the 12 September orders so that it read as follows: Sitzler Savage shall not sell, transfer, assign, part with the benefit of, or part with possession of the land, fixtures, or chattels forming or situated on the Peko Tenements as defined… 10 This variation allowed the corporate respondents to continue mining the tenements and export extracted magnetite ore overseas. The corporate respondents gave an undertaking that they would set aside an amount from the payments received from the sale of the magnetite extracted that was equivalent to the royalty allegedly payable to the applicant under the deed, such amount to be held on trust and either paid into court or held in a controlled money account. 11 As I noted above, the administrators and receivers and managers were appointed in February 2024, after those orders were made. Pursuant to s 440D of the Act, the proceeding as against the corporate respondents has been stayed since that time. 12 By a letter from the administrators' solicitors dated 12 August 2024, the applicant was informed that the voluntary administrators do not intend on taking any part in this proceeding and will abide by the court's direction in relation to it. 13 Section 440D(1)(b) relevantly provides that during the administration of a company, a proceeding against the company cannot proceed except with the leave of the Court (unless the administrator has otherwise consented). 14 The principles governing whether or not an order should be made under s 440D(1)(b) were not in dispute, and they have been summarised in many cases. As Gleeson JA said in Rialto Sports Pty Ltd v Cancer Care Associates Pty Ltd (No 2) [2023] NSWCA 246 at [24], "[a]lthough not to be treated as a shopping list, some of the factors which the authorities have identified as relevant to the exercise of the discretion" include the following: whether the proceedings have a solid foundation and give rise to a serious dispute; whether, and the extent to which, the administrator would be distracted by the proceedings from his or her own duties and obliged to incur legal costs; the stage which the proceedings have reached; who appointed the administrator and the circumstances of that appointment; who is applying for leave to proceed; whether the claim is a monetary one; whether the claim is one in respect of which the company is insured; any disadvantage to the applicant in not being granted leave to proceed; and whether there are otherwise good reasons for allowing a creditor to depart from the general intention of Pt 5.3A which is that a creditor ought not be able to take action against the company. 15 In this case, counsel for the applicant did not, sensibly enough, rely on all parts of that list. 16 First, counsel for the applicant submitted, and counsel for the corporate respondents agreed, that the proceeding has a solid foundation and gives rise to a serious dispute. 17 Counsel for the corporate respondents submitted that such a factor is neutral. I do not agree with that submission. Once it is established that a proceeding has a solid foundation and gives rise to a serious dispute, it seems to me that the cases say that that is a factor that weighs in favour of the granting of leave. 18 It was also submitted on behalf of the corporate respondents that the proceeding is embryonic. That much must be accepted in the sense that not terribly much has happened in relation to it. It was also submitted by counsel for the corporate respondents that I should weigh into the balance the fact that the litigation will result in a "quagmire", as it was put. But, in my view, that really is to venture into the realm of speculation. 19 The second factor that counsel for the applicant relied on is whether, and the extent to which, the administrators would be distracted by the proceedings from their duties and obliged to incur legal costs. Here, it was submitted by the applicant that the administrators will not be distracted or incur significant costs at least because the defence of the proceeding will be conducted by the receivers on behalf of their appointor, and the administrators apparently indicate that they do not intend to participate. For those reasons, that factor weighs, if only slightly, in favour of granting the application. 20 The third factor relied on by the applicant was whether the claim is merely a monetary one. Here, the amended statement of claim makes clear that the applicant seeks declaratory relief and relief by way of specific performance, as well as damages. Again, that weighs (perhaps only slightly) in favour of the granting of the application. 21 The fourth factor relied on by the applicant was that it will or may suffer disadvantage if leave were not given because, it was said, the receivers were "hedging their bets". This was a reference to an interlocutory application that has been filed in this proceeding, but not pressed today, by the receivers for an order that paragraph 5(c) of the orders made by Beach J on 12 September and varied on 15 September be discharged. It was submitted that the receivers were seeking to, or may, hedge their bets because, on the one hand, they opposed the granting of leave to proceed in this application, but on the other, have filed an application seeking the discharge of paragraph 5(c) of Beach J's orders as amended. 22 On behalf of the respondents, it was submitted that the "imperative" to press that application "does not exist at present". But I am not altogether sure what was meant by that. It seems to me that the submission about hedging bets does have some force and, again, weighs in favour of the granting of the application. 23 In circumstances where no other particular factor was referred to on behalf of the applicant, they are the reasons that I will deal with. It was not suggested, for example, that there are "otherwise good reasons" within the meaning of the final factor referred to by Gleeson J. 24 For the reasons outlined above, I am therefore satisfied that there are good reasons for allowing the applicant to depart from the general intention of Part 5.3A of the Act that its applications against the company be stayed, and I will accordingly make an order granting leave to the applicant pursuant to s 440D(1)(b) of the Act to proceed with this proceeding against the first to third respondents. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.

At a glance

Court

Decision date

Before

Source

Judgment (3 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (1)