Navigate Global Payments Pty Ltd (Receivers and Managers Appointed) (in liq) v Combis, in the matter of Navigate Global Payments Pty Ltd

BESANKO J: 1 This is an application by the plaintiff, Navigate Global Payments Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (Navigate Global), for orders under s 447A of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule, Schedule 2 of the Corporations Act. The precise declaration and orders sought are set out below (at [21]). 2 Navigate Global is a proprietary company limited by shares which had its registered address and principal place of business in New South Wales. Mr Wade Dilks and Mr Timothy John Connors were the directors of the company. 3 On 30 June 2023, Navigate Global ceased trading and Mr Nick Combis was appointed as the voluntary administrator of Navigate Global. On the same date, AMAL Trustees Pty Limited as trustee for the DCF Australian Private Debt Fund, the secured creditor of Navigate Global, appointed receivers and managers to Navigate Global under the terms of its security agreement with the company. 4 On 4 August 2023, a majority of the creditors of Navigate Global at a second meeting of creditors resolved to approve the entry by Navigate Global into a deed of company arrangement which had been proposed by Mr Connors. 5 On 17 August 2023, a Deed of Company Arrangement (DOCA) was executed. The parties to the deed were Mr Combis, Navigate Global and Mr Connors. Mr Combis was appointed as Deed Administrator. A relevant clause in the DOCA is as follows: 4 Deed Administrator … 4.4 Agent of the Company In exercising the powers conferred by this Arrangement and carrying out the duties arising under this Arrangement, the Deed Administrator is taken to act solely as agent for and on behalf of the Company. The Deed Fund is dealt with in clause 8 and part of clause 8 is in the following terms: 8.1 Deed Fund (a) The Deed Fund will comprise: (i) the Contribution Sum; (ii) any funds held in the Administration Bank Account; (iii) any funds recovered by the Receivers and Managers and are available to the Company following the conclusion of the receivership; (b) The Deed Fund represents the property which will be available to meet the claims of the Participating Creditors by distribution in accordance with this clause 8 of this Deed. (c) The Deed Administrator will, in accordance with the terms of this DOCA, hold and administer the Deed Fund for the benefit of the Participating Creditors in accordance with this clause 8 of this Deed. The term "Contribution Sum" is defined in clause 1 and means the sum of $125,000. 6 Mr Connors is the party who is to make the contribution of $125,000. Clause 8.3 deals with the application of the Deed Fund. 7 On 22 August 2023, Mr Connors paid the sum of $125,000 to Mr Combis in his capacity as Deed Administrator of the DOCA in accordance with clause 7 thereof. 8 On 23 August 2023, Shiny Pty Ltd, a creditor of Navigate Global, brought action NSD 898 of 2023 in this Court in which it sought, amongst other orders, an order that the DOCA be terminated. 9 On 1 September 2023, this Court (Markovic J) made a number of orders, including an order that the DOCA be terminated. Her Honour's orders had the effect that Mr Combis ceased to hold the office of Deed Administrator under the DOCA. Mr Combis continues to hold the Deed Fund. 10 A further order made by this Court on 1 September 2023 was that Mr John Sheahan and Mr Oliver John Donaldson Sheahan of Sheahan Lock Partners be appointed as liquidators of Navigate Global. 11 The liquidators assert that the Deed Fund is the property of Navigate Global and should be paid by Mr Combis to Navigate Global. 12 On 5 September 2023, solicitors acting for Mr Connors asserted in a letter to the solicitors for Mr Combis that the contribution made by Mr Connors should be returned to him. 13 On 11 September 2023, in an email from Mr Combis to the solicitors for Mr Connors (with a copy being sent to the liquidators), Mr Combis advised that the liquidator had also made a claim to the funds held by him and that given that the Court was yet to make final orders: … there are seemingly competing claims to the funds held by me, I will be holding the funds pending final order(s) of the court and possibly order as to ownership of the funds. 14 On 13 September 2023, Mr John Sheahan and Mr Oliver Sheahan met with Mr Connors to discuss the affairs of Navigate Global, including the Deed Fund. 15 On 29 September 2023, Mr Oliver Sheahan sent a letter to Mr Connors' solicitors in response to their letter of 5 September 2023. Mr Sheahan made the following points: (1) the identity of the party paying the Contribution Sum is unknown and may be relevant; (2) on the authorities and, in particular, the decision in Antqip Hire Pty Ltd (subject to a deed of company arrangement) (in liq) [2020] NSWSC 487 at [94]-[117]; there is no basis upon which Mr Connors can claim repayment of the Contribution Sum. It was not paid to Mr Combis as a trustee in which circumstances might be said that the purpose of the trust had failed and the beneficial interest reverted to Mr Connors. It is clear from the terms of the DOCA that the "Deed Administrator is taken to act solely as agent for and on behalf of the Company". The Contribution Sum became and is an asset of the company. The liquidators invited Mr Connors to withdraw his demand and provide Mr Combis with an irrevocable direction to pay the Contribution Sum to them as liquidators of the company within seven days. They advised that should he fail to do so, they would apply to the Court for appropriate relief and would rely on the letter on the question of the costs of any such application which will be sought against Mr Connors on an indemnity basis. The liquidators did not receive a response to their letter dated 29 September 2023. 16 On 9 October 2023, the liquidators sent an email to Mr Combis seeking confirmation as to whether Mr Connors' solicitors had withdrawn Mr Connors' demand for repayment of the Contribution Sum. On 10 October 2023, Mr Combis indicated to the liquidators that Mr Connors' had not withdrawn his demand or claim for the return of the DOCA funds to him. 17 On 13 October 2023, the liquidators instructed their solicitors to send correspondence to the solicitors for both Mr Combis and Mr Connors setting out their position and repeating their demand that Mr Combis remit the Contribution Sum to the nominated liquidation account within seven days. 18 The liquidators reiterated that no trust was created in favour of participating creditors (see clause 8.1) or otherwise. They reiterated their claim for the payment of the monies and ask that that be done within seven days of the date of the letter. They indicated that they would institute proceedings if the monies were not paid over and that they would seek orders from the Court that Mr Connors pay the costs incurred in pursuing the application on an indemnity basis. 19 The solicitors for the liquidators did not receive any response to the letter dated 13 October 2023. The solicitors attempted to call Mr Connors' solicitors on 23 October 2023, but they received no return call. The solicitors for the liquidators sent an email to the solicitors for Mr Connors on 24 October 2023 in which they said the following: I refer to our letter of 13 October and to my voicemail of yesterday. Can you please confirm whether you intend to respond to our letter? I would be grateful to receive your response as soon as possible. 20 The sum of $124,289.14 is currently held by Mr Combis and he has not remitted that sum to the liquidators' nominated liquidation account. 21 On 27 October 2023, the liquidators commenced this proceeding by Originating process. As I have said, the application is made under s 447A of the Corporations Act and s 90-15 of the Insolvency Practice Schedule, Schedule 2 of the Corporations Act. The liquidators seek the following relief in the application: 1 a declaration that the Deed Fund established pursuant to the Deed of Company Arrangement dated 17 August 2023 (Deed Fund) is the property of the Plaintiff; 2 an order that the Defendant pay or cause to be paid the Deed Fund to the Plaintiff; 3 costs; 4 an order that the costs of this application are costs in the liquidation of the Plaintiff; 5 such further and other order as this Honourable Court deems appropriate. 22 Mr Combis has appeared in the proceeding and filed a Submitting Notice. 23 At a case management hearing on 14 November 2023, Navigate Global was given leave to join such further defendants as it thought fit, with such leave to be exercised on or before 15 November 2023 by filing an amended originating application. Navigate Global filed an Amended Originating process on that day joining Mr Connors as a second defendant to the proceeding. 24 On 15 November 2023, the amended originating application and other relevant documents were served on Mr Combis, Mr Connors and the receivers and managers of Navigate Global. 25 On 5 December 2023, the solicitors for Mr Connors sent an email to the solicitors for Navigate Global. That email asserts that a forensic decision was made by the liquidators to commence the proceedings against the former administrator and that thereafter, without any advance notice to the solicitors for Mr Connors, the liquidators sought leave to join him. Notice of the joinder was only provided after the fact. Had notice of the liquidators' intention to join Mr Connors being provided in advance, it is asserted that Mr Connors' solicitors may have been able to obtain instructions at that time regarding the relief sought as against the administrators. It is asserted that Mr Connors was denied that opportunity by the liquidators. The solicitors for Mr Connors state that they are instructed that he consents to order that the Deed Fund is the property of the company and that Mr Combis pays the Deed Fund to the liquidators and that the liquidators' costs of the proceedings are costs in the liquidation of the company. They go on to say the following: In the circumstances, it is not appropriate for there to be any costs order against Mr Connors. I would be grateful if you could provide a copy of this email to the Court so that his Honour his aware of Mr Connors' position. 26 The Deed Fund comprises, and only comprises, the Contribution Sum. 27 The assertion by Mr Connors' solicitors is not correct. In the liquidators' letter dated 29 September 2023 to Mr Connors' solicitors, the liquidators included the following: In the circumstances, we invite you to withdraw your client's demand, and provide Mr Combis with an irrevocable direction to pay the Contribution Sum to us as liquidators of the Company, within seven days. Should you fail to do so, we will apply to the Court for appropriate relief, and will rely on this letter on the question of the costs of any such application, which we will seek against your client on an indemnity basis. Similarly, should your client, notwithstanding the matters set out in this letter, apply or otherwise agitate for the repayment of the Contribution Sum, then we will rely on this letter on the question of our costs in resisting same, which we will again seek against your client on an indemnity basis. 28 In their letter dated 13 October 2023, the solicitors for the liquidators said the following: Given the clear position on the authorities, there is no basis for Mr Connors to continue to maintain a claim over the Contribution Sum or to object to Mr Combis remitting the Contribution Sum to Our Clients. Should Mr Connors continue to prevent Mr Combis from remitting the Contribution Sum as required, Our Clients will seek orders from the Court that Mr Connors pay the costs incurred in pursuing their application on an indemnity basis. 29 On 5 December 2023, the solicitors for the liquidators advised the solicitors for Mr Connors that they would put the latter's email before the Court, but would be seeking an order for costs on an indemnity basis against Mr Connors. 30 On the same day, the solicitors for Mr Connors responded and in the course of their response said the following: Despite the circumstances asserted in the second paragraph of your email, the liquidators made an informed decision to commence proceedings against the former administrator only; the liquidators deliberately decided not to name Mr Connors as a defendant to the proceedings when they were issued. That forensic decision (at the outset) by well-informed and advised liquidators undermines the position your client proposes to take on the question of costs as against Mr Connors. 31 I reject the argument advanced by Mr Connors. The argument involves, it seems to me, excluding his behaviour prior to the order giving leave to join him as a respondent. That is not the correct starting premise for a consideration of the application for costs. The fact is that had Mr Connors indicated to the plaintiff in a timely fashion the position he now takes, these proceedings would not have been necessary. That is sufficient to justify an order for costs. Even if Mr Connors had a bona belief in the matters outlined in his solicitors' letter dated 5 September 2023, he should, by the time of the "warnings" by the liquidators' solicitors on 29 September 2023 and 13 October 2023, been aware that he did not have a plausible basis for resisting the substantive orders. That is sufficient to justify an order for indemnity costs. 32 I make the following declaration: (1) The Deed Fund established pursuant to the Deed of Company Arrangement dated 17 August 2023 (Deed Fund) is the property of the Plaintiff. 33 I make the following orders: (1) The first defendant pay the Deed Fund to the plaintiff. (2) The costs of this application be costs in the liquidation of the plaintiff. (3) The second defendant pay the plaintiff's costs of the proceedings on an indemnity basis. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko.