[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
EX TEMPORE Judgment
HIS HONOUR: Before me by notice of motion filed on 12 March 2021 is an application to vary orders of the Court made on 4 November 2020 so as to delay their coming into effect until 6 April 2021. Most recently, that has been amended so as to reduce the extension of time sought until 2pm Friday 26 March 2021. This is in substance the third application to vary the orders to provide additional time within which the parties can settle their dispute.
The background, shortly summarised, involves uncontested findings of many years of oppressive conduct in companies co‑owned by interests associated with the Snell and Glatis families (the third respondent, Mr Culley, also played a role but a relatively small one). Following an eight day trial in 2019, a judge sitting in the Corporations List of the Equity Division delivered a lengthy judgment making numerous findings of oppression and ordering a compulsive buyout by the companies' controller, Mr Keith Snell, by judgment delivered in November 2019: In the matter of Scientific Management Associates Pty Ltd [2019] NSWSC 1643. Her Honour fixed the buyout price at some $66 million. Those orders were stayed early last year: Snell v Glatis [2020] NSWCA 78.
Mr Snell's appeal was heard on 25 June 2020. Shortly beforehand Mr Snell sought by proposed amended notice of appeal to seek orders which had not been sought at first instance, namely, that the companies be wound up. That application was opposed but if it were granted there was but limited opposition to the appropriateness of winding up orders being made in order to achieve the fair distribution of the very substantial assets held by companies against a backdrop of many years of conduct which had been found to be oppressive. (I note that on appeal there was no challenge to any of the primary judge's findings of oppression.) The late amendment of the notice of appeal led to the need for further submissions following the hearing of the appeal. The time for providing those submissions was extended but were completed on 15 July.
This Court delivered judgment indicating that winding up orders would be made on 6 August 2020: Snell v Glatis (No 2) [2020] NSWCA 166. The winding up was to take place on a basis reflecting the findings at trial in relation to certain assets, certain loans and certain other dealings involving Mr Snell. That led to a regime for submissions resolving matters of detail. The Court's timetable allowed for six weeks for that to occur but that was extended by consent to 11 weeks. The parties' written submissions were completed on 29 October, with a second judgment of this Court being delivered on 4 November: Snell v Glatis (No 3) [2020] NSWCA 267. The orders made then provided for the winding up of the companies on the basis either agreed or resolved by that judgment in orders (4)‑(22).
Order (1) substituted Ms Margaret Edith Snell, who was the executrix of Mr Keith Snell, who had been the appellant but who died shortly after the hearing of the appeal. Importantly for present purposes orders (2) and (3) provided for a stay of 62 days of the substantive winding up orders and other adjustments. The purpose of the stay was to permit the parties to have some two months to seek to resolve their dispute without the need for the companies to be wound up.
By email to the Registrar of 10 December 2020 the parties advised that they were "presently at an advanced stage of negotiating a resolution of the subject matter of the proceedings", although they added that they were uncertain as to whether a final resolution would be agreed upon. They asked for the 62 day period, to which they had originally agreed at the time final orders were formulated, to be extended into February this year. That occurred by consent on 14 December. The extension was to 26 February 2021.
By further email to the Registrar dated 24 February 2021, the parties advised that they
"have continued to progress their negotiations towards a resolution of the subject of the proceedings. The time afforded has allowed the parties to move closer to a final resolution, and a deed of settlement is in an advanced state of preparation, although it is not yet agreed".
It was added that:
"Although the parties have been working diligently and in good faith in the pursuit of a resolution, these efforts have been delayed by the intervening Christmas period, complications relating to the deceased estate of the late Mr Keith Snell and the United States residence of Mr Christopher Glatis, who because of the COVID‑19 pandemic have not been able to travel to Australia."
The parties sought a further extension of time to 23 April 2021, which is very nearly six months after the final orders were made and some nine months after the main judgment of this Court was delivered acceding to the appellants' belated submission that the companies be wound up.
The Registrar responded the following afternoon as follows:
"The Court is not prepared to grant any longer extension, even by consent, on the basis of emails between the parties and the Court. If there is to be a further application for an extension of time, then it should be made by motion supported by affidavit sworn by an officer of the company with personal knowledge of the matters to which he or she deposes. The Court would expect that the evidence relied on in support of any such application would not only explain the steps taken to date, but also address the current position in relation to the companies, including their creditors and the moneys owed to them and when any such amounts are payable. Any application will be heard and determined in open court."
The Registrar by consent extended the operation of the stay until 16 March 2021, thereby giving a further 19 days for the parties to either make further application or resolve their dispute.
In accordance with the Registrar's directions, last Friday afternoon affidavits were prepared by the solicitor for the first and second respondents and the Group Financial Manager of the SMA Group companies, Mr Robert Pottenger. Consistently with the Registrar's email, Mr Pottenger gave evidence that there were no creditors demanding repayment, and the management accounts and other recent financial statements of companies within the Group indicated a very healthy surplus of assets over liabilities. However, when the matter came before me last Monday I indicated that there was in the solicitor's affidavit very little by way of explanation of the steps taken to date, and in particular as to the steps taken between 25 February to date at which stage it must have been plain from the Registrar's email that the time for consent adjournments was coming to an end. There was also very limited explanation of why it was that a further two months was required for the parties to resolve their dispute.
But the most important consideration mentioned by me last Monday was what appeared on the face of the most recent management accounts to be the writing‑off of a loan slightly in excess of $3 million to Mr G Walker. Mr Walker featured prominently in the lengthy judgment at first instance as a developer who obtained very substantial sums of money on interest free and unsecured terms from Mr Keith Snell. Her Honour went so far as to say at [32] that: "Mr Snell was in the thrall of property developer Greg Walker" to whom Mr Snell lent company money from time to time.
The management accounts of the period ended 31 December 2020 for Scientific Management Associates (Operations) Pty Ltd identified a "loss on loans written‑off" of $3,028,190 for the quarter October‑December 2020, and in the notes indicated that an entry for a "Loan - Palm Beach Barrenjoey Rd (G Walker)" in the amount of $3,017,087 had been incurred at that time. Finally, the operating statement for that period indicated "Non‑recoverable loans written‑off" of $3,028,190 for the quarter ended December 2020.
I raised with counsel then appearing whether what the most recent management accounts reflected was a decision to write off some $3 million of debt owed by one of the companies to one of the property developers who had received millions of dollars of company funds in circumstances found by the primary judge to have been oppressive and which were prima facie in breach of fiduciary obligation. They were unable to respond substantively. I mean no criticism whatsoever to those appearing on the day; they had no opportunity to identify what underlay those entries on the management accounts and I should add in fairness to them that the three entries I have referred are found in some 30 pages of management accounts of four companies. I indicated that in those circumstances I was not prepared to grant the further extension of time, even by consent. If indeed these companies were to be wound up it was of concern if those presently in control were writing off millions of dollars of company debt in the meantime.
The matter has returned to me today and I have the benefit of further explanatory affidavits explaining in appropriate detail what steps had been taken and what is to be undertaken in the next five days which will, all going to plan, entirely resolve the dispute between the parties. I also have the benefit of an explanation from Mr Skyring, an accountant retained on behalf of the Glatis interests, who gave evidence before the judge and was the subject of favourable credit findings: see at [6]. He explains in fact that the position is rather more complicated than I had inferred on Monday. He explains that there were two separate transactions each involving an amount slightly more than $3 million (which explains the difference between the entries for $3,028,190 and $3,017,087). The entry in relation to Mr Walker is said to involve a reclassification of funds and reflects a diminution in the value of a fixed asset for land and buildings, rather than the writing off of a loan. There appears to have been a separate writing off of a loan from SMA (Boats) on a basis that need not be elaborated for present purposes. It is not - and to be fair does not purport to be - a complete account of the accounting treatment of the entries which attracted my attention on Monday. But bearing in mind that it will have been provided in haste, by an accountant who was trusted by the Glatis interests, and well regarded by the primary judge, I am satisfied that those matters should not stand in the way of the orders that are now sought by all active parties.
There may have been a mismatch over the last four months between the litigants' expectations and those of the Court in relation to this final aspect of the dispute. On the one hand the parties may have taken the view that their dispute was essentially a private one, and that they should be given every opportunity if possible to resolve it without the resort to an expensive, time consuming and public process of winding up. On the other hand, from the Court's point of view, this is a matter in the Corporations List and any matter involving the winding up or potential winding up of companies has a public component. One consequence is that as best as may be, the Court will give accelerated attention to it. In this litigation there have been two decisions of this Court each of which have been given in a matter of weeks after the conclusion of the parties' submissions.
Further, the findings after a lengthy trial at first instance involve large amounts of money being used to acquire property and to be lent to third parties with the potential consequences that may have for dealings of others. As I indicated on Monday, had the evidence not been clear that there was a very substantial surplus of assets over liabilities, I would not have acceded to the most recent application for an extension of time thereby delaying the appointment of the companies' windings up. But this is an unusual case.
Even if this litigation is regarded as wholly private, s 56 of the Civil Procedure Act 2005 (NSW) requires me in acceding even to an application for a consent adjournment, to apply the overriding purpose, and that includes considerations of speed and expense. The days of lengthy consensual adjournments, without proper articulation of why those adjournments are required, have long since past. And it is to be borne in mind that the variations are to a regime that was proposed by the parties which contemplated a two month window to resolve their disputes. For that reason I have taken the course of insisting that this latest application for an adjournment be substantiated by adequate evidence and take place in open court. It is also for that reason that I have given these reasons.
On the basis of the evidence now provided to me, which is to the effect that there is complete agreement to a suite of documents which will entirely resolve the dispute between the parties, and the only reason that final orders cannot be made immediately resolving this litigation is (a) the need for execution of documents and (b) the need for non‑parties, including as I understand it some non‑parties who are not located in Australia, to execute documents including board resolutions, I make by consent the following orders:
1. Stand over the Notice of Motion filed 12 March 2021 part heard to Thursday 25 March 2021.
2. Vary the existing stay of orders 4-24 made on 4 November 2020 so that it expires at 2pm on Friday 26 March 2021.
3. Direct the parties to provide any consent orders for the finalisation of the proceedings and the Notice of Motion to Leeming JA's Associate by 4pm on Wednesday 24 March 2021.
4. Note that in the event that consent orders are provided in accordance with order 3 above, those orders will be made and the listing on Thursday 25 March 2021 will be vacated.
[3]
Amendments
23 March 2021 - [4] - "6 August 2021" changed to "6 August 2020"
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 23 March 2021