Lindholm, in the matter of Munday Group Pty Limited (Receivers and Managers Appointed) (In Liquidation) v Tsourlinis Distributors Pty Ltd

Federal Court of Australia|2010-12-21|Before: Mr J, Finkelstein J

John Ross Lindholm and Peter Damien McCluskey (the "deed administrators") have leave, jointly or severally, to transfer all of the shares in Taylor McKay Pty Ltd (subject to deed of company arrangement) (receivers and managers appointed) (ACN 118 950 244) to Walson Group Pty Ltd ACN 115 597 254 or its nominee.
The deed administrators' costs of and incidental to their interlocutory process filed on 14 December 2010 be costs in the deed administration. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 330 of 2010

IN THE MATTER OF MUNDAY GROUP PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE) BETWEEN: JOHN LINDHOLM AND PETER MCCLUSKEY IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF MUNDAY GROUP PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE OF FIRST PLAINTIFFS)

UPDAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) Second Plainitff JODAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) Third Plaintiff HAMDAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) Fourth Plaintiff

AND: TSOURLINIS DISTRIBUTORS PTY LTD (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE)

JUDGE: FINKELSTEIN J DATE: 21 DECEMBER 2010 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 The deed administrators of Taylor McKay Pty Ltd (subject to deed of company arrangement) (receivers and managers appointed) (Taylor McKay), seek leave under s 444GA(1) of the Corporations Act 2001 (Cth) (Act) to transfer all the shares in Taylor McKay to the purchaser of the Whalers' Inn hotel in Warrnambool under the sale agreement between the group of companies of which Taylor McKay is one, as vendor and Walson Group Pty Ltd as purchaser. 2 The Munday group comprises 17 companies. Each group company granted securities to the National Australia Bank. The Bank's securities, once fully realised, will be insufficient to cover the debt owed to the Bank, and there will be a substantial shortfall. 3 Following a default under the security arrangements, in April 2010 the bank appointed receivers to all group companies. At about the same time the directors appointed administrators to take control of the companies' affairs. 4 On 3 December 2010 the receivers entered into the sale agreement. By this agreement the receivers sold the units in the Taylor McKay Unit Trust, of which Taylor McKay Pty Ltd is the trustee. The principal asset of the trust is the Whalers' Inn hotel. The sale agreement is conditional on the transfer to the purchaser of the shares in Taylor McKay. The sale agreement also requires Taylor McKay to execute a deed of company arrangement (DOCA), which will compromise creditors' claims. 5 On 3 December 2010 the second meeting of creditors of Taylor McKay was held. The creditors resolved that a deed of company arrangement be executed. The deed provides for the establishment of a creditors' trust and a trust fund of $20,000 for distribution among ordinary unsecured creditors in full satisfaction of their claims. The unsecured creditors then become beneficiaries of the trust fund (excluding the Bank, employees and the deed administrators, all of which will be paid directly by the Bank). 6 The deed administrators have considered alternative outcomes to creditors from completion of the sale agreement and DOCA, and liquidation. The comparison shows that in a winding up, unsecured creditors, both priority and ordinary, would receive nothing, whereas under the sale agreement and DOCA, priority creditors would be paid in full and ordinary unsecured creditors would receive 5 cents in the dollar.

Transfer of shares 7 Section 444GA(1) enables a deed administrator to transfer shares in the deed company if the deed administrator has obtained the consent of the shareholder or the leave of the Court. The Court may only give leave if it is satisfied that the transfer would not "unfairly prejudice" the interests of members of the company: s 444GA(3). 8 The shares in Taylor McKay are held by Ricky John Munday. He has not given his consent to a transfer, despite several requests to do so. A transfer of his shares is necessary in order to effect the sale transaction under the sale agreement and to produce the benefits to creditors under the DOCA. 9 The shares themselves have no economic value: Taylor McKay is insolvent, both on a cashflow test and on a balance sheet test. Mr Munday, as shareholder, will receive nothing in either a winding up or under the DOCA. 10 Although the shares have no economic value because the company's debts far exceed the value of its assets, they do have some "tactical" value to Mr Munday. He could extract a payment for a transfer of the shares. The payment could not exceed the cost of an application by the deed administrators to be given the right to transfer the shares, assuming there is no risk of failure. That, "value" is not however, the kind of interest which s 444GA(3) is designed to protect. To the contrary, it is just the type of blackmail the section is designed to stop. 11 I will give the deed administrators leave to transfer Mr Munday's shares in Taylor McKay. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate: Dated: 31 January 2011 SCHEDULE OF PARTIES JOHN LINDHOLM AND PETER MCCLUSKEY IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS First Plaintiffs UPDAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY Second Plaintiff JODAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY Third Plaintiff HAMDAY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY Fourth Plaintiff AND TSOURLINIS DISTRIBUTORS PTY LTD First Defendant CARLTON TOWERS PTY LTD Second Defendant GROSVENOR PROPERTY DEVELOPMENT PTY LTD Third Defendant SCHEDULE OF FIRST PLAINTIFFS Munday Group Pty Limited (in liquidation) (receivers and managers appointed) Dontaris Pty Limited (in liquidation) (receivers and managers appointed) Fisherman's Pier Pty Limited (in liquidation) (receivers and managers appointed) Hamday Pty Limited (subject to deed of company arrangement) (receivers and managers appointed) Hot Summers Pty Limited (in liquidation) (receivers and managers appointed) Joday Pty Limited (subject to deed of company arrangement) (receivers and managers appointed) Magday Pty Limited (subject to deed of company arrangement) (receivers and managers appointed) MGQ Ayr Pty Limited (in liquidation) (receivers and managers appointed) Munday Group Holdings Pty Limited (in liquidation) (receivers and managers appointed) Munday Tiger Pty Limited (in liquidation) (receivers and managers appointed) Pieday Pty Limited (subject to deed of company arrangement) (receivers and managers appointed) Ricnic Pty Limited (in liquidation) (receivers and managers appointed) Spar Holdings Pty Limited (subject to deed of company arrangement) (receivers SRAM Nominees Pty Limited (in liquidation) (receivers and managers appointed) Taylor McKay Pty Limited (subject to deed of company arrangement) (receivers Upday Pty Limited (subject to deed of company arrangement) (receivers and managers appointed) Yadnum Pty Limited (subject to deed of company arrangement) (receivers and managers appointed) OF MUNDAY GROUP PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 116 558 420) (and others according to the attached Schedule of First Plaintiffs) ARRANGEMENT) ARRANGEMENT) ARRANGEMENT) ACN 116 558 420 ACN 067 640 920 ACN 100 738 583 ACN 113 225 979 ACN 069 834 555 ACN 111 150 509 ACN 113 225 657 ACN 116 838 825 ACN 117 478 458 ACN 126 769 328 ACN 109 800 357 ACN 066 794 509 and managers appointed) ACN 100 379 628 ACN 102 863 981 and managers appointed) ACN 118 950 244 ACN 106 215 356 ACN 106 053 212

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