Manny v Sims and Parbery from PPBAdvisory and ANZ Bank Ltd and McGrathnicol [2013] ACTCA 9

Court of Appeal (ACT)|2013-02-27|Before: Buchanan JJ, Refshauge J

1. This appeal was commenced, by leave, well out of time. It relates to events arising from defaults on loans owed to the second respondent by companies of which the appellant was the sole shareholder and director. Those defaults led to the appointment of receivers, and then administrators, to those companies.

2. On 25 October 2012, the appellant filed an application seeking an adjournment of the appeal. This application appeared designed to stop the hearing of the appeal and any procedure associated with it until the applicant had been able to appeal the outcome of an interlocutory hearing before Refshauge J on 17 October 2012. The immediate background to the application for an adjournment, an application to adduce further evidence and the interlocutory steps attempted by the appellant shortly before the appeal was to be heard, are more fully set out in Manny v Sims [2012] ACTCA 42.

4. On 1 November 2012, in the week before the appeal was listed for hearing, the appellant again sought leave to adduce fresh evidence. None of it could bear upon any analysis of the correctness of the decision under appeal. The affidavits in support of the application were simply argumentative, or sought to rely on material post-dating the decision under appeal, and not relevant to it. As will be seen, the issues presented by the appeal are straightforward. The application to adduce fresh evidence was without merit and was rejected at the hearing of the appeal.

5. The appellant was a developer. By 2009, Master Harper found, "he had built up through companies and trusts under his control a substantial portfolio of commercial and residential real estate" (at [3] Manny v Sims [2011] ACTSC 58). In that year the appellant negotiated substantial financial facilities with the second respondent for three companies in the "Jeff Manny Group". Facilities totalling $14,008,000.00 were offered by letter dated 22 June 2009.

6. Terms of the facilities offered included that the second respondent would hold: first registered mortgages over identified properties; mortgage debentures in the form of fixed and floating charges over all the assets (including trust assets) of each of the companies; cross-guarantees and indemnities amongst the three companies; and, personal guarantees by the appellant.

7. At the time the offer was made, by letter dated 22 June 2009, the second respondent already held the securities upon which it was prepared to rely with respect to the facilities then offered. That was made clear in the letter of offer itself which listed each of the securities, and described them as "held". The appellant apparently wished to execute new securities for the loans the companies were taking, limited to securing the actual facility then offered, reducing as the debt was discharged, with no provision for the security to apply to future or other advances as the existing securities then did. Presumably, he contemplated that the existing securities would be discharged, or quarantined in some way.

8. On 15 July 2009, the appellant countersigned the second respondent's letter of offer, which listed the existing securities. Under his signature he added the words "I have been told by the ANZ Bank that I have no other option than sign this documents [sic]". Unsurprisingly, perhaps, as the appellant indicated during his oral submissions on the appeal, this endorsement was unattractive to the second respondent which was not prepared to act on his countersignature dated 15 July 2009.

9. On 20 July 2009, the appellant again countersigned the letter of offer dated 22 June 2009, on this occasion without qualification. The appellant accepted the offer as sole director of each of the companies and as personal guarantor for them.

10. The finding is inevitable, therefore, that the appellant and the second respondent proceeded in due course on the basis that the facilities offered on 22 June 2009 would be secured by the existing instruments referred to in the letter of offer of that date, as the terms of those instruments each permitted.

11. The termination date of the facilities was either 17 August 2009 (for some) or

17 October 2010 (for most). The first mortgages provided a power to appoint receivers to take possession in the event of default including failure to pay any part of secured money on time. The mortgage debentures (which were registered with the Australian Securities and Investments Commission) gave power to appoint receivers to the charged property in the event of default, including failure to pay money when due and payable. The mortgage debentures also gave to the second respondent the power to appoint administrators to the three companies in stated circumstances.

12. There was a further matter to which Master Harper gave his attention. During 2010, orders were made by the Family Court of Australia in proceedings commenced by the appellant's wife in 2007. On 13 July 2010, final orders were made which contemplated the realisation of various of the mortgaged and charged assets. The appellant asserted before Master Harper that the effect of those orders was to limit or restrain the power of the second respondent to send in receivers or administrators. That contention was rightly rejected. Order 16 of the final orders made on 13 July 2010 (Manny v Manny (Unreported, Family Court of Australia, Faulks DCJ, 13 July 2010) amended under the slip rule on 14 July 2010) provided:

16. Nothing contained in the preceding orders in relation to the sale of the properties precludes the ANZ Bank from exercising its powers pursuant to their current documentation between the ANZ Bank and the Jeff Manny Group to enforce their security in accordance with that documentation or to seek an accelerated sale of the properties upon termination of the current arrangements on 17 October 2010. It is noted, however, that subject only to the ANZ Bank's exercising those rights, the ANZ Bank has agreed to the program set out above for the sale of the properties.

13. The loans made by the second respondent were not repaid on the termination dates. Master Harper described what then happened as follows (at [18]-[23]):

On 1 November 2010, the bank served a notice of default on each of the companies claiming the total then owing to the bank, $10,733,090.02. The notice of default relied upon failure to repay the amount outstanding by 17 October 2010. The notice also asserted other breaches which I do not need to consider.

On 22 December 2010, the bank by deed appointed the first defendants, Mr Sims and Parbery, as receivers over the commercial and residential property of the Manny Group, for the purposes only of collecting the rents on behalf of the mortgagee. This appointment was made pursuant to the individual mortgages over the listed properties.

On 20 January 2011, the bank issued notices under section 93 of the Land Titles Act 1925 (ACT) of its intention to exercise power of sale over each of the commercial and residential properties.

On 21 January 2011, the bank by deed of appointment extended the role of Messers Sims and Parbery to that of receivers and managers over the listed property generally. On the same date, the bank, exercising the available power under the mortgage debentures, appointed Messers Sims and Parbery as receivers over the "charged property" as defined in the mortgage debentures, that is to say, all of the assets of the companies.

On 28 February 2011, the bank appointed the third defendants, Messers Smith and O'Keefe, as administrators of the three companies pursuant to section 436C of the Corporations Act 2001 (Cth).

On 10 March 2011, the bank ceased the appointment of Messers Sims and Parbery as receivers of rents, leaving in place their appointment as receivers generally. It is unclear to me whether this cessation had any practical effect.

14. The applications with which Master Harper was dealing, in the judgment under appeal, were to set aside the appointment of the receivers and administrators by the second respondent. There was both an originating process (which attacked the appointment of receivers) and an interlocutory application (which attacked the appointment of both receivers and administrators). The interlocutory application was filed on 30 March 2011, shortly before a creditor's meeting scheduled for 5 April 2011 at which it would have been open to creditors to wind up the three companies.

15. The matter came before Master Harper the following day, on 1 April 2011. Everybody agreed that the interlocutory application was urgent and Master Harper commenced to hear it that day. His Honour continued to hear it on the following sitting day, Monday, 4 April 2011. He reserved his decision and delivered judgment the same week, on Friday, 8 April 2011. In the meantime he ordered that the creditors' meeting be adjourned to a date after his decision. Those urgent processes were responsive to the interests of the appellant.

16. In his decision Master Harper removed as parties each of the three companies, and another company, which had been added to the proceedings as co-plaintiffs by the appellant. The appellant had been given leave to represent the interests of each of those companies to that point. Master Harper was correct to remove those companies as parties to the proceedings for the reasons which he gave.

17. Unless the appellant was correct to contend that administrators had been appointed without authority to each of the companies which gave the mortgage debentures, the appellant was precluded from directing the initiating or continuation of proceedings by any of the companies without the consent of the administrators. As Master Harper found, after hearing fully from the appellant, that the administrators were validly appointed, removal of those three companies from the proceedings was never in doubt.

18. The fourth company which the appellant had caused to be joined as a co-plaintiff was not a party to the arrangements with the second respondent. Although it was claimed by the appellant that this company was a creditor of one or more of the three other companies (about which no finding need be made), that did not give it standing to challenge the appointments of either receivers or administrators to those companies. The fourth company was also correctly removed as co-plaintiff. In any event, co-plaintiff or not, its continued participation could have had no effect on the outcome. Nor does it for the fate of the appeal.

19. When dealing with the attack on the appointment of receivers, Master Harper pointed out that pt 5.2 of the Corporations Act 2001 (Cth) deals with receivers and other controllers of property of corporations. He observed that there is no general statutory power to terminate a valid appointment of a receiver although various persons may apply to the Court for a declaration as to the validity of the appointment. He treated the applications as though they were applications for a declaration that the appointments of the receivers were invalid. That seems, with respect, to have been an efficient and proper course to take.

20. For the purpose of the applications before him, Master Harper was also prepared to assume that the appellant was a creditor of one or more of the three companies to whom administrators had been appointed although there was no evidence to that effect. Again, that was an efficient and proper course to take in the circumstances. Master Harper was also satisfied that the appellant was an interested person with sufficient standing to raise the challenges which he did in the proceedings to the appointment of administrators to the three companies.

21. The conclusions reached by Master Harper, which require consideration on the present appeal, were expressed as follows (at [30]-[32]):

I am satisfied that in respect of each of the three companies, the mortgage debenture gave the bank power to appoint administrators, and that the appointments were made validly pursuant to those powers.

In relation to the appointment of the first defendants as receivers, I am satisfied that they were validly appointed. Accordingly Mr Manny's claim for a declaration that their appointment was invalid must fail.

Mr Manny has also failed to persuade me that the appointment of the third defendants as administrators was invalid, and his claim for a declaration to that effect must fail.

22. There is no error in those conclusions. The interlocutory application filed on 30 March 2011 was properly dismissed.

23. At the same time, Master Harper also dismissed the originating application. During the proceedings before Master Harper the submissions made by the appellant had not been confined to matters relevant to the interlocutory orders he immediately sought. He had ranged over a series of complaints about the conduct of the second respondent and the process commenced by the steps the second respondent had taken. Those submissions included allegations of abuse of process. They included particular suggested examples of neglect of their responsibilities by the receivers. Master Harper obviously had such matters in mind when he said (at [33]):

Whilst I acknowledge and understand Mr Manny's concerns, I am not persuaded that any of the other matters he has raised in submissions would justify my making orders under section 447A or 447E which would interfere with the orderly course of the administration. His conviction that he could get better prices for the companies' assets if he were permitted to take charge of the sale process rather than leaving it in the hands of the administrators is entirely understandable and may be soundly based, but it is not a reason to end the administration and place Mr Manny back in charge of the companies' fortunes. The fact is that the companies owe the bank something of the order of $10m and are not in a position to pay it back without at least selling a major portion of their assets, probably most and perhaps nearly all of their assets. The companies are accordingly unable to repay at least their debts to the bank as they fall due and are technically insolvent. It cannot be expected that the court in such circumstances will return control of a company to its director or directors.

24. Although the notice of appeal nominally challenged each of the (four) orders made by Master Harper no specific ground of appeal challenged the decision to dismiss the originating application as well as the interlocutory application. The orders sought, if the appeal was successful were, furthermore, confined to those sought in the interlocutory application, namely orders directed to the validity of the appointment of the receivers and the administrators. This was confirmed in substance by a written summary of argument handed up by the appellant during the appeal, which addressed each of the grounds of the appeal. No complaint was made there either that the originating application should have been kept on foot regardless of the outcome of the interlocutory application.

25. Dismissal of the interlocutory application rendered it almost inevitable that there was no utility in any contemplated pursuit of the balance of the originating application. Subject to any appeal, the appellant was bound by the fate of his interlocutory application and could not go behind it. In fact there was no appeal until leave to appeal out of time was granted over one year later. As there is now no relief sought in the appeal which depends upon the originating application there is no occasion to consider whether it should have been kept alive for some unexplained purpose.

26. There was, in any event, having regard to the way the case was conducted, an adequate explanation for dismissal of the originating application also, and a proper foundation for doing so.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Counsel for the Appellant: The Appellant appeared in person

Counsel for the First and Second Respondents: Mr B Meagher SC

Solicitor for the First and Second Respondents: Ashurst Australia

At a glance

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Before

Source

Judgment (42 paragraphs)

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Legislation Cited (1)