McMillan v Coolah Home Base

Background

1. I do not propose to repeat the matters set out in my earlier judgment. Suffice it to note that Coolah Home Base is subject to a deed of company arrangement (DOCA) and that all of the plaintiffs are members of Coolah Home Base and, as such, are bound by the DOCA by virtue of s 444G of the Corporations Act.
2. The members cannot, until the DOCA terminates, "begin or proceed with a proceeding against the company or in relation to any of its property" (see s 444E(3)(a) of the Corporations Act).
3. The leave that is now sought by the plaintiffs is to enable them to proceed with the proceedings already commenced in this Court and elsewhere. However, it must be noted that the leave that is sought extends more broadly to permit the commencement of "new proceedings against [Coolah Home Base] in any Court or Tribunal if required".

Legal principles

1. Rees J summarised the relevant legal principles on an application for leave pursuant to s 444E of the Corporations Act in In the matter of Antqip Hire Pty Limited (subject to deed of company arrangement) (in liquidation) [2020] NSWSC 487, saying (at [7]) that: 7. …the question is whether the claim sought to be agitated may be readily dealt with under the proof of debt procedure, or whether the company will be harassed or have its assets wasted by permitting litigation to proceed against it whilst under a DOCA.
2. Her Honour decided in that matter that leave ought to be granted because the issues there in question were "of short compass and concern[ed] foundational questions … [that could not] be resolved under the DOCAs or in the ordinary course of a liquidation" (see at [8]).
3. Earlier, in Mehan v Arrium Limited (formerly Onesteel Limited) [2016] NSWSC 1680, Black J referred to the principles applicable to the exercise of discretion to grant leave to begin or proceed with proceedings under s 444E(3) of the Corporations Act as summarised by Perry J in Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (subject to deed of company arrangement) [2016] FCA 1246 (see at [83]ff), his Honour noting (at [14]) that: 14. …the applicable principles were those applied in determining applications for leave under s 471B of the Corporations Act in relation to liquidation; the onus lies upon the applicant to establish that the ordinary procedure established by a deed of company arrangement should be displaced, namely, that the continued pursuit of the litigation should be substituted for the procedure by which a claimant lodges a verified proof of debt with the deed administrators who admit or reject it, wholly or in part and from whom an appeal lies to the court; the question whether leave should be granted turns upon the exercise of discretion, and each application must turn upon its particular facts and the question cannot be approached as a "shopping list" of factors; and the exercise of discretion is informed by previous decisions as to relevant factors to be considered and by the purpose of the ordinary rule in s 444E(3) of the Corporations Act prohibiting a creditor from pursuing litigation, including the risk that a company in deed administration would be subject to a multiplicity of actions.

Plaintiff's Submissions

1. It is convenient next to summarise the plaintiffs' submissions.
2. The plaintiffs note the following terms of the DOCA: 12.1 The Deed Administrators, and not the Directors, shall have control and stewardship of the Company from the Deed Date until the settlement of the sale of the Land (DA Control Period). 12.2 The control and stewardship revert to the Directors at the end of the DA Control Period. … 14.6 Notwithstanding clause 12.1, the Directors shall be entitled to continue the Robertson Proceedings and the McMillian and Darch Proceedings. For the avoidance of any doubt, any costs incurred by the Directors or Company after the date of the Deed are not payable out of the Deed Fund or by the Administrators or Deed Administrators.
3. It is noted that, the "DA Control Period" now having ended, the directors (Ms Janet Kelly and Mr Graeme Booker, who are defendants to the present proceeding) have regained control of the company pursuant to cl 12.2 of the DOCA (this having occurred on settlement of the sale of the land in question). The plaintiffs point out that the Deed Administrators wrote to shareholders on 18 December 2019, advising that control of the company (Coolah Home Base) had reverted to its directors on completion of the sale.
4. The plaintiffs note that, as set out above, cl 14.6 of the DOCA provides that the directors "shall be entitled to continue the Robertson Proceedings and the McMillian and Darch Proceedings". The "Robertson Proceedings" to which reference is there made are proceedings commenced in the District Court of New South Wales (bearing the file number 19/48222). It is said that Ms Robertson's proof of debt was rejected, so that her dispute can now only be resolved outside the DOCA. In the case of the "McMillan and Darch Proceedings" (the present proceeding), it is noted that sixteen other plaintiffs have been joined and a new proceeding started, such that the issues now go beyond the original Corporations List application under s 247A of the Corporations Act. The plaintiffs submit that it would be inequitable for the directors to be entitled to continue these proceedings while the plaintiffs (including Ms Robertson, Mr McMillan and Mr Darch) are barred from continuing the proceedings brought by them.
5. I note that there is also a proceeding on foot in the New South Wales Civil and Administrative Tribunal (NCAT), namely the "Tait Proceeding" (bearing the file number NCAT RV 20/32988), in which it is said that Ms Tait (and other applicants) seek to enforce provisions of the Retirement Villages Act 1999 (NSW) (Retirement Villages Act) which it is said preserve her (and their) right to continue residing at Coolah Home Base despite the transfer of the land to the directors' new entity. The plaintiffs point out that the contract for sale of land (the terms of which the directors guaranteed the purchaser would observe) included terms that required the purchaser to honour existing residence agreements. It is said that the purchaser is in breach of those terms but that privity of contract forces the residents to seek other remedies. It is further said that Mr Tait and other residents have demanded that the Deed Administrators use their powers under the DOCA to enforce compliance but that the Deed Administrations have refused to do so (and, hence, it is said that it was necessary for the residents to turn to NCAT to protect their position as residents).
6. It is said that NCAT is the appropriate forum for the Tait Proceeding by reference to ss 138 and 139 of the Retirement Villages Act, which provide that an operator cannot commence proceedings in the Supreme Court of New South Wales, District Court of New South Wales or Local Court of New South Wales to obtain possession (see s 138) and that a person cannot remove a resident otherwise than in accordance "with this Act or any other Act or law" (see s 139).
7. The plaintiffs say that they should not be barred from enforcing their rights of continuing occupation through their NCAT application, or alternatively that orders should be made maintaining the status quo ante by declaring that the existing Residential Site Agreements are enforceable against Coolah Tourist Park Pty Ltd (Coolah Tourist Park) (the company owned by the directors which now owns the land).
8. The plaintiffs say that Coolah Home Base has sold all its property under the DOCA and that the company has been "stripped" so that there is no risk of its assets being wasted by permitting litigation to proceed against it whilst under a DOCA. It is further noted that the Deed Administrators have said that they are not in control of Coolah Home Base; that the administration of the DOCA is nearly complete; and it is said that the only thing remaining, prior to the effectuation of the DOCA, is the distribution of the Deed Fund.
9. In the circumstances and for the preceding reasons, the plaintiffs argue that the DOCA has effectively ended, that the statutory stay has no further purpose and that their access to justice should not be impeded. Thus, leave is sought for each of the plaintiffs to begin or proceed with any proceedings necessary against Coolah Home Base or, alternatively, that leave be granted for the plaintiffs to continue the respective proceedings and any interlocutory or related proceedings.

Determination

1. In the present case, as noted above, there are already no less than three sets of proceedings on foot relating to issues concerning the circumstances in which Coolah Tourist Park acquired its interest in the land on which the plaintiffs' caravans are located and the conduct of the company's directors before and after that acquisition. There are also issues raised in the respective proceedings concerning the nature of the plaintiff's interests in the land. The Deed Administrators have made clear that the deed administration is effectively at an end and that control of the company has reverted to the directors.
2. In Mehan, Black J (at [12]) referred to relevant factors which have been identified in the authorities (citing J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748 (at [8]) and Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585 (at [146])), including issues as to: 12. … whether the plaintiff's claim has a solid foundation and gives rise to a serious dispute; whether the proceedings have progressed to an advanced stage; whether the plaintiff was involved in the administrators' appointment; whether the plaintiff would suffer disadvantage if leave is refused; whether the defendant is insured against the alleged liability that is the subject of the proceedings; whether, if leave is granted, the deed administrators will be unreasonably distracted from performance of their statutory duties or obliged unnecessarily to incur substantial legal costs; and whether, in the circumstances, there are good reasons for allowing the plaintiff to continue the proceedings even if the deed administrators do not provide consent…
3. Noting that the factors referred to above are not exhaustive, I nevertheless consider their application in the present case to be as follows. There can be no doubt that there is a serious dispute. Indeed, attempts summarily to dismiss the Supreme Court proceeding have already failed. The subject matter of the respective proceedings that are on foot is unsurprisingly of concern to the plaintiffs (who are, I understand, all retirees) - going, as it does, to their living arrangements. I accept that they would therefore be disadvantaged if they could not pursue their claim(s). I have no information as to insurance but it might be considered likely that the company (and certainly the Deed Administrators) have or would have had insurance. The proceedings in this Court, though not at an advanced stage, have been on foot for some time; and there is nothing to suggest that Deed Administrators (whose task they themselves apparently consider now to be effectively complete) will be unreasonably distracted from the performances of their statutory duties if leave is granted. As adverted to (see at [3] above), I understand that the Deed Administrators neither opposed nor consented to this application.
4. In all the circumstances, I consider that leave should be granted, albeit not in as broad terms that have been sought. In particular, it is not appropriate to give leave for the bringing of any future proceedings, whether those be related to the present proceeding or not. Instead, what would be required (if the company is still under a DOCA at that stage) would be a fresh application for leave.

Orders

1. For the above reasons, I make the following orders: 1. Grant leave to the plaintiffs (or some of them as the case may be) pursuant to s 444E(3)(c) of the Corporations Act 2001 (Cth) to continue the following proceedings against the first defendant (on the condition that the plaintiffs do not seek to enforce any judgment obtained against the first defendant without further leave of the Court): proceedings 2020/00044327 in the Supreme Court of New South Wales; proceedings 19/482 in the District Court of New South Wales; and proceedings RV 20/32988 in the New South Wales Civil and Administration Tribunal. 2. Order that the plaintiffs' costs of the motion be the plaintiffs' costs in the cause.

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