Remember that profusion of Linked In posts that gushed forth before Christmas from triumphal law firms representing the successful respondents in the Hastie Group liquidators’ bank guarantee action?
Well that hubristic effusion might in future be seen to have been the highpoint of their clients’ defiance after Hastie Group’s liquidator last week filed and served an appeal to that Christmas gift of a judgment presented to the respondents by outgoing Federal Court judge John Middleton on December 22.
In Hastie Group Limited (in liq) v Multiplex Constructions Pty Ltd (Formerly Brookfield Multiplex Constructions Pty Ltd) (No 4) [2022] FCA 1575 Justice Middleton – who has since retired – dashed the hopes of Hastie liquidator Craig Crosbie and his funder, the Commonwealth’s Active Creditor division, by refusing to find that the defendants owed the Hastie entities in liquidation various amounts they’d drawn down under bank guarantees.
While his honour did find that Crosbie’s claims in respect of $60 million in debtors stands it’s the issue around section 437D of the Corporations Act and whether or not there is property that vests with the liquidator in the bank guarantee that PwC partner Crosbie and his backers want resolved in their favour and a Full Court of the Federal Court will now be convened to hear the case.
An affidavit of Hall & Willcox partner Wayne Kelcey in support of the application for leave to appeal outlines why Crosbie and his advisors believe Justice Middleton got it wrong.
“The effect of these orders is to deny the claims made by the liquidator and each Hastie entity,” Kelsey said.
“(a) that each Hastie Entity had a property interest in the performance bond amend the proceeds received by a respondent upon presentation of that performance bond; (b) that upon the administration of each Hastie Entity commencing on 28 May 2012, Chapter 5 of the Act required that all claims held by a respondent were required to be dealt with in accordance with Chapter 5; (c) the Respondents, each being an unsecured creditor of the Hastie Entity which provided the performance bond, were not entitled to present the performance bonds, or if they presented them, were not permitted by s 555 and 556 to use the proceeds thereof to satisfy any claims which they had against the Hastie Entity. “
According to the Draft Notice of Appeal there are 14 grounds upon which Crosbie and the Commonwealth believe Justice Middleton’s judgment and orders should be overturned.
Ground One
(a) The primary judge erred in finding that the Hastie Entities did not possess a property
interest in the proceeds received by the respondents after calling on guarantees
purchased from the Hastie Entities from various banks and provided by or on behalf of
the Hastie Entity to the respondents (J [100]-[101]).
(b) The primary judge ought to have found that at all material times the Hastie Entities
achieved a property interest in the proceeds received by the respondents after calling on
the guarantees.
Ground Two
(a) The primary judge erred in finding that it was the guarantees and not the subcontracts
that dealt with payment under the guarantees (J [372]).
(b) The primary judge ought to have held that payment of the guarantees was at all times
subject to and governed by both the terms of the guarantee and the subcontracts
pursuant to which they were provided by the Hastie Entities.
Ground Three
(a) The primary judge erred in holding that the respondents achieved a proprietary right to
the proceeds beneficially held in their own right unless a trust was found to exist (J
[373]).
(b) The primary judge ought to have found that beneficial entitlement of any respondent to
proceeds received in the consequence of a call on the guarantee was at all times subject
to and in accordance with the subcontract pursuant to which the guarantee was provided
and the obligation to account in respect of any surplus proceeds.
Ground Four
(a) The primary judge erred in finding that a bank guarantee is one of many forms of
financial instrument which is “paid for” by one party but “the property” of another (J
[382]).
(b) The primary judge erred in finding that the Hastie Entities did not purchase the
guarantees for themselves.
(c) The primary judge ought to have found that the guarantees purchased by the Hastie
Entities were, upon their purchase, property of the Hastie Entities and further that
provision of those guarantees to each respondent achieved no more than the transfer to
the respondent of a possessory interest subordinate to the Hastie Entity’s property
interest.
Ground Five
(a) The primary judge erred in finding that the entitlement of the Hastie Entities to any
“surplus proceeds” was not a property interest in the proceeds (J [386]).
(b) The primary judge ought to have found that the entitlement to surplus proceeds was a
property interest in the proceeds.
Ground Six
(a) The primary judge erred in finding that, on the basis of the contractual arrangements as
a whole, the Hastie Entities held contingent rights in respect of the bank guarantees (J
[393]).
(b) The primary judge ought to have found that the Hastie Entities, after provision of the
guarantees to the respondents, retained a conditional right to require the return of the
guarantees.
Ground Seven
(a) The primary judge erred in concluding that the series of transactions which resulted in a
credit in the respondents’ bank accounts after presentation of the bank guarantees,
denied the Hastie Entities property interest in the proceeds ([399]).
(b) The primary judge ought to have held that the series of debits and credits which followed
the presentation by the respondents of the guarantees were causally and transactionally
linked so as to affirm the continuing property interest of the Hastie Entities in the
proceeds received by the respondents.
Ground Eight
(a) The primary judge erred in finding that the banks made payments under the guarantees
upon the presentation of same by the respondents without reference to any instruction of
the Hastie Entities (J [401]).
(b) The primary judge ought to have found that the banks were authorised to make
payments under the guarantees by each Hastie Entity pursuant to the terms of the
facility agreements.
Ground Nine
(a) The primary judge erred in finding that the payments to the respondents of the proceeds
of the bank guarantees were not payments on behalf of the Hastie Entities (J [415]).
(b) The primary judge ought to have found that the monies paid out by the banks were funds
loaned by the banks to the Hastie Entities.
(c) The primary judge ought to have found that, pursuant to the facility agreements between
the banks and each Hastie Entity, all payments made in response to presentation of the
guarantees were payments authorised by and made on behalf of the Hastie Entity which
had purchased the guarantee presented.
Ground Ten
(a) The primary judge erred in finding that s 437D of the Corporations Act 2001 (Cth) (the
Act) did not apply to the payments to the respondents made in response to the
presentation of the guarantees (J [102]).
(b) The primary judge ought to have found that the payments made in response to the
respondents’ presentation of the bank guarantees were payments made on behalf of
each Hastie Entity with the consequence that that transaction or dealing was rendered
void by s 437D of the Act (cf. J [102], cf. J [415]-[417]).
Ground Eleven
(a) The primary judge erred in finding there was no utility in the making of a winding up
order as sought in proceeding VID 237 of 2022 (J [440]).
(b) The primary judge ought to have been satisfied that there was utility in exercising the s
467B discretion in favour of making a winding up order.
Ground Twelve
(a) The primary judge erred in finding that where respondents do not seek to lodge a proof
of debt they can determine their s 553 claims themselves and rely upon that
determination to assert unequivocally that they do not owe monies to the Hastie Entities
by reason of s 553C of the Act (J [253]).
(b) The primary judge ought to have found that on and from 28 May 2012 each of the
respondents’ “claims” were subject to the provisions of Chapter 5 of the Act, and in
particular s 553 and 553C.
Ground Thirteen
(a) The primary judge erred in finding that ss 555 and 556 of the Act did not “not fall to be
considered” and did not prevent the respondents using the guarantee proceeds as
payment by the Hastie Entities of s 553 claims which that respondent could prove for in
the winding up of the relevant Hastie Entity (J [422]).
(b) The primary judge ought to have found that ss 555 and 556 of the Act prohibited the
respondents using the guarantee proceeds as payment by the Hastie Entities of their s
553 claims.
Ground Fourteen
(a) The primary judge denied the appellants procedural fairness in ordering on 1 October
2021 that the issue as to the amount of any alleged set offs or final quantum of each
claim made by the Appellants in the second further amended originating process filed 3
March 2021 be treated as being separate and distinct from issues of “liability”.
(b) The primary judge ought to have conducted the trial on the basis that the question of the
validity of the receivables and the recoverability of the amount sought in the second
further amended originating process were issues of liability, not just issues of quantum.
(c) The primary judge ought to have permitted the appellants to tender at trial all the
evidence on which they sought to rely. Ground Fifteen
(a) The primary judge erred in making the cost orders in orders 2, 5, 10, 11, 13 and 14 in
proceeding VID 1277 of 2017 and order 2 in proceeding VID 237 of 2022 made on
22 December 2022.
(b) The primary judge ought to have found that it was not appropriate to make costs orders
before final orders were made.
More than 10 years after the Hastie Group was placed in external administration priority creditors are still owed almost $11 million and the Commonwealth is keener than ever to clawback some if not all of the more than $28 million it’s paid out via FEG to the Hastie Group’s 7,000 odd employees.
While no date has yet been set for the hearing of the leave application iNO understands if granted it won’t derail a flurry of mediations currently scheduled to run though March.
iNO will be interested to see how many Linked In posts emerge trumpeting the payments of settlements.
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