An application for leave to proceed against a company which is subject to a deed of company arrangement
The New South Wales Court of Appeal (Gleeson JA) has refused to grant leave to the Chief Commissioner of State Revenue to proceed against two companies that are each subject to a deed of company arrangement.
The Chief Commissioner of State Revenue in New South Wales sought leave to proceed against companies in two appeals. Each company was subject to a deed of company arrangement. Therefore, leave was required under section 444E of the Corporations Act 2001 (Cth) (the Act).
Justice Gleeson refused to grant such leave.
His Honour held that the test to be applied in determining whether to grant leave to proceed is similar to the test that applies to applications under section 471B of the Act (for the grant of leave to proceed against a company which is in winding up). The test is whether the applicant has satisfied the Court that there is a serious question to be tried, and specifically whether the “claim has a solid foundation and gives rise to a serious dispute.”
In relation to the Commissioner’s arguments in favour of the grant of leave, the Court held as follows.
First, notwithstanding that the amount of money at stake in one of the appeals ($68 million) was a large sum of money, that does not necessarily mean that leave should be granted.
Second, it is not always the case that a risk that the same issues will be re-litigated if the claims were the subject of a proof of debt will be a strong factor in favour of the grant of leave.
Third, the Court rejected the Commissioner’s argument that he would have claims against third parties if his claims on appeal were to succeed against the respondents.
Fourth, the Court rejected the Commissioner’s argument that he ought to have the opportunity of having costs orders made below set aside on appeal, otherwise the Deed’s administrators might seek to enforce such orders against the Commissioner. Justice Gleeson held that there was no evidence that the Deed’s administrators intended to seek costs from the proceedings below against the Commissioner.
Finally, the Court rejected an argument that the appeals had substantial precedential value, and further held that even if that was the case, “it is not the function of the Court to provide advisory opinions in relation to other ‘potential’ disputes.”
Notwithstanding the outcome, His Honour noted that if circumstances were to change, a further application for leave could be made to the Court.
Roslyn Kaye – CommBar profile