Phisci Pty Ltd v Green Frog Nominees Pty Ltd

REASONS FOR JUDGMENT 1 The plaintiff brings this action to recover a parcel of 1,230,593 shares in the capital of Restaurant Brands New Zealand (RBNZ). The shares are presently registered in the name of the first defendant, Green Frog Nominees Pty Ltd. The plaintiff asserts that it has a beneficial interest in those shares in the nature of an equity of redemption. The second defendant, Opes Prime Stockbroking Pty Ltd (rec and mgr apptd) (admin apptd), also claims an interest in the shares. It contends (through its receivers) that it is the sole beneficial owner of them. The issue presently to be resolved is whether the plaintiff should be permitted to proceed with the action. There are two impediments. First, since the commencement of the action Green Frog was placed into liquidation. Second, at an earlier point in the proceeding the plaintiff gave an undertaking it would not proceed with the action without leave of court or consent of the administrators of OPS. 2 The background may be described briefly. The plaintiff, which is in the restaurant business, engaged Opes Prime Paradigm Pty Ltd, a company that is related to OPS, to act on its behalf in relation to the acquisition of the shares in RBNZ. The plaintiff's intention was to purchase the shares partly with its own funds and partly with borrowed money. It claims that OPS agreed to lend it the money it needed on the security of the shares. The plaintiff contends the agreement was in the nature of a margin loan. OPS, on the other hand, says that the principal terms of the agreement with the plaintiff are to be found in a Global Master Securities Lending Agreement (GMSLA). If the GMSLA contains the relevant terms of the bargain then the plaintiff would have no proprietary interest in the shares. 3 When it became apparent to the plaintiff that its claim to an interest in the shares was not accepted by OPS, it commenced this action. At the time Green Frog was not in liquidation, but OPS had been placed into administration. On the application of the plaintiff I made orders restraining Green Frog from disposing of the shares pending the trial of the action. Section 440D of the Corporations Act 2001 (Cth) provides for a stay of proceedings against the property of a company in administration in the absence of the administrator's consent or leave of the court. The cases say the section applies to property claimed by a company in administration even if its title is in dispute and even if the property is held by a third party: see Cope v Home [2002] NSWSC 777. Accordingly I granted the plaintiff leave to bring the action to obtain the injunction. However, so as to not interfere too much with the administration, as a condition of the grant of leave I required the plaintiff to undertake not to proceed any further with the action without leave. I had in mind the possibility that following an investigation of the plaintiff's claim the action might be compromised. 4 There has been no settlement and the plaintiff wishes to continue with its action to recover what it alleges is its property. It now faces two hurdles. Not only is there the undertaking, there is, as well, s 500 of the Corporations Act 2001 (Cth) which effects a stay of the action against Green Frog except with leave of the court. 5 OPS says that it will consent to proceedings being continued in respect of property over which it claims title. It gives this consent through the receivers who as the company's managers have control of the action. If the consent was required for purposes of overcoming the stay imposed by s 440D it could not be given by OPS or the receivers. Section 440D permits an administrator to consent to a proceeding being brought in relation to the property of a company in administration. But there is no reason why OPS through its receivers could not consent to the plaintiff being released from its undertaking. That does not fall under s 440D. This notwithstanding, if I were of the view that the administration would be prejudiced to the release, I would not accede to the plaintiff's application without notice to the administrators. That is not the case. 6 So far as Green Frog is concerned, the liquidator does not oppose leave being granted under s 500. The liquidator has indicated that he intends to take no part in the action and will leave it to OPS to oppose the plaintiff's claim. In any event, it is appropriate to grant the leave sought. Green Frog is a necessary party to the action as it is the legal owner of the shares. It is usual in that circumstance to grant leave: Rio Grande do Sul Steamship Co, Re (1887) LR 5 Ch D 282; Marshall v Glamorgan Iron & Coal Co (1868-69) LR 7 Eq 129. I will, however, impose a condition that no judgment for a money sum be executed without leave. There is no money claim against Green Frog but I wish to guard against the possibility that the plaintiff might execute any costs order it might recover against Green Frog. I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.