Australasian Memory Pty Ltd v Brien

Notice of the application

1. Notice of the application has been given to the Australian Securities and Investments Commission (ASIC), the various external controllers of relevant overseas Equiticorp entities and creditors of the Companies, including by way of circular to creditors uploaded to the liquidators' website and sent to creditors, and by notice published in The Australian newspaper on 27 December 2019.
2. The notification process has not elicited any enquiry or objection from ASIC or from creditors of any of the Companies. No person sought leave to appear as an interested person at the hearing of the application.

Background

1. The Companies formed part of the Equiticorp Group which was established in the 1980s. At the time of its collapse in 1989 the Equiticorp Group comprised over 190 subsidiary and investment entities in a number of jurisdictions including Australia, New Zealand, Hong Kong, The Netherlands, The Cook Islands, Cyprus, United Kingdom, China, Liberia and Singapore.
2. After earlier distributions to creditors, the Companies' remaining assets consist of cash at bank totalling approximately $13.7 million and debt claims, in the form of intercompany loan receivables, against other entities of the Equiticorp Group.
3. An affidavit of Mr Kogan, one of the liquidators, details the background to the present applications. It is convenient to reproduce the helpful summary of his evidence which is contained in the plaintiffs' written submissions: 4. The winding up of the Companies commenced in 1989, and has been ongoing since that time. The particulars of each of the Companies are as follows: No Company Date of Incorporation State of Incorporation Date of winding up 1 EAL 30.03.1984 NSW 21.01.1989 2 ETL 06.05.1949 NSW 10.02.1989 3 EIAL 14.05.1985 ACT 15.02.1989 4 Sowani 02.03.1987 NSW 10.02.1989

5. ... 6. Extensive recovery, investigation and litigation work was conducted from the commencement of the liquidation of the Companies. Such work has been completed for some time; no further work of that nature remains to be carried out. 7. The plaintiffs, as liquidators of the Companies, sought and obtained endorsement from the creditors of EAL and ETL to undertake a comprehensive investigation of the remaining Equiticorp Group entities, with a view to formulating a finalisation strategy. The Continuum 8. Having undertaken those investigations, the plaintiffs identified that a majority of the Equiticorp Group have been wound up and deregistered, and that there are 13 entities within the Equiticorp Group which have a debtor and creditor relationship (Continuum Entities). Further, Mr Kogan identified that "dividends paid to related parties were effectively being returned (at least in part) to the original distributing entity, albeit diluted by leakages" (the Continuum). The Continuum is set out in diagrammatic form in Mr Kogan's exhibit. 9. Further, the plaintiffs identified that there are at least 3 entities within the Equiticorp Group, but which sit outside the Continuum, which await distributions from the Continuum entities and the affairs of which cannot be finalised until the Continuum entities are finalised. 10. There are no further tangible assets to be realised by the Continuum Entities. The winding up of other Equiticorp Group (that is, other than the Continuum Entities) cannot be fully finalised unless and until final distributions are made by the Continuum Entities. The position of the Companies 11. As at 4 December 2019, the time of swearing his affidavit, the Companies held cash at bank of approximately $13.7 million, and debt claims in the form of intercompany loan receivables against other entities in the Equiticorp Group. The value of the Companies' unsecured creditors, the counterparties to the intercompany loan receivables, and the distributions paid to date are detailed in Mr Kogan's affidavit. Investigations and development of the Model 12. Since February 2016, the plaintiffs have been in discussions with the external administrators of the Continuum Entities in New Zealand, Hong Kong, the Netherlands and the Cook Islands (Overseas Appointees). Those discussions included inquiries directed at fully identifying the Continuum and formulating an appropriate approach to finalising the liquidations of the Continuum Entities. 13. On 11 August 2016, the plaintiffs held concurrent meetings of the Committee of Inspection of EAL and creditors of ETL to report on the investigations. There, the plaintiffs foreshadowed their intention to model the funds flow within the group, with a view to (if possible) paying a single, final distribution and breaking the Continuum. Resolutions to the effect that the plaintiffs be directed to take steps to investigate the options to finalise the liquidations of EAL and ETL, including liaising with the appointees to related entities, to determine a strategy to finalise the liquidations were carried unanimously. 14. The plaintiffs prepared a detailed financial model to facilitate a concurrent and coordinated distribution to exhaust all the funds available (the Model), which will then enable the finalisation of the liquidation of the Equiticorp entities. Mr Kogan identifies that the Model was designed "to calculate the return creditors of the Continuum Entities would receive if there were a number of concurrent and coordinated distributions (with appropriate sequencing) made by all 13 Continuum Entities … to ultimately exhausted all of their cash holdings." Mr Kogan gives evidence that the Model: (a) considers the relationships between the Continuum Entities (and their cash holdings) to determine an order for distributions in order to reduce the number of distributions and iterations to calculate ultimate, aggregate return; (b) seeks to determine the rate of distribution creditors would otherwise receive if distributions were passed through the Continuum; (c) is designed to include Australian Dollars, New Zealand Dollars, Euros and Hong Kong Dollars and allows for entries in the native currency and then translates all amounts into the functional currency selected for the Model; (d) is designed to pay distributions in the most efficient way possible (keeping as little in the Continuum as possible during each iteration); (e) is designed to deal with amounts carried forward where a Continuum Entity receives a distribution from another Continuum Entity which is before it in the order of distribution by carrying them forward to the next iteration; (f) indicates that there would be nine separate rounds of distributions until there are no funds remaining within the Continuum (on the basis that such distributions are appropriately sequenced); (g) calculates the net amount to be transferred between the Continuum Entities to address differences between the "Total Gross distributions" and the "Total amount available for distribution" and considers a mechanism to deal with those transfers; and (h) ultimately determines that a single, coordinated distribution by the Continuum Entities, which has the effect of all available funds (save for provisions for costs) being distributed to entities outside the Continuum, would allow the administrations of the Continuum Entities to be finalised in a way that does not give rise to forgiveness or assignment of the debts (to prevent any negative taxation consequences). 15. The Model has been prepared, and is accompanied by an explanatory memorandum which describes its functions and operation. The plaintiffs have consulted with the foreign appointees to the other Continuum Entities concerning the Model and, in May 2018, Mr Kogan received approval from each foreign appointee to proceed with the "Coordinated Distribution". 16. On or around 29 August 2018, the plaintiffs and the Overseas Appointees executed a non-binding term sheet, recording an "in principle" agreement to execute a restructuring support deed to achieve the coordinated distribution (including by agreement to adopt the Model to calculate distributions; to share information for input into the Model; and to make payments and receive distributions in accordance with the Model) and support the appointment of the plaintiffs as voluntary administrators of the Companies and to subsequently oversee the execution of the deed of company arrangement. 17. On 12 March 2019, the plaintiffs issued a report to creditors of the Companies and convened meetings of the Companies' creditors to be held on 29 March 2019. The plaintiffs published notice of those meetings in The Australian on 15 March 2019. In their report to creditors, the plaintiffs addressed the results of their investigations in detail, together with the proposed strategy for finalisation of the external administrations of the Companies utilising the Model. 18. The plaintiffs have identified a number of expected benefits if the Companies are placed into voluntary administration. Those are: (a) the ability to execute a deed of company arrangement in respect of each Company, enabling final distributions to be made to creditors; (b) a framework to crystallise and deal with any unknown legacy claims; (c) a method of fixing claims for the purpose of calculating the distribution rates for the final distributions from the Continuum Entities; (d) time and cost efficiencies; (e) a resolution of the Continuum issues; (f) the acceleration of recoveries and elimination of multiple rounds of distributions; (g) the maximisation of recoveries for creditors, by minimising foreign exchange and transaction costs; and (h) the fixing of creditor claims at a point in time to allow the finalisation of the external administration of the Companies shortly after the Coordinated Distribution is made. 19. Mr Kogan estimates that the costs savings associated with the proposed finalisation strategy will be between $150,000 and $400,000, being referable to the reduction of foreign exchange and transaction costs, and the saving of costs which would otherwise be incurred by the plaintiffs in making 9 further rounds of distributions and remaining in office for a further 3 years. 20. Mr Kogan gives evidence of the nature of the deeds of company arrangement the plaintiffs will seek to explore, including that the deeds of company arrangement will enable claims of the Companies to be resolved; the Model to be effected; the Coordinated Distribution and distributions to be made; and the winding up and deregistration of the Companies to be progressed and finalised. Mr Kogan expresses the view that the administration and deed of company arrangement procedure will provide certainty for information to be input into the Model, which would not have otherwise been possible. 21. The plaintiffs' proposed strategy for finalisation of the external administrations was met with unanimous support of creditors of the Companies. 22. Finally, Mr Kogan identifies that while Sowani stands outside the Continuum, the plaintiffs consider that it too should be placed into voluntary administration: that is because an administration of that entity can be used to finally ascertain the quantum of and fix creditor claims; the voluntary administration and distribution process can run concurrently with the procedure for the Continuum Entities and will generate time and cost efficiencies; and as Sowani's only remaining assets are claims against Continuum Entities (EAL and Capitalcorp Holdings Limited (in liq)), its administration would accelerate a final distribution to creditors.
6. In the course of oral argument, senior counsel for the plaintiffs took the Court to the financial Model prepared by those assisting the plaintiffs which demonstrates that there would need to be nine separate rounds of distribution by the Companies, each involving 13 steps as between group companies, to exhaust the remaining funds within the Continuum entities, taking into account the circularity of the creditor/debtor position among those entities. It is not necessary to set out the detail of that evidence.
7. What is sought to be achieved by the administration of the Companies and deeds of company arrangement, assuming creditors agree to the proposed deeds, is a single co-ordinated distribution by the Continuum entities involving a net distribution of the amount that would otherwise be received by the relevant entities following the nine separate rounds of distributions. To that end it is proposed that the Companies would act as a clearing house for the single distribution of funds between Equiticorp Group companies.
8. The evidence of Mr Kogan establishes that the form of administration provided by Pt 5.3A of the Corporations Act, which has met with unanimous support of creditors of the Companies, will facilitate the more cost efficient and timely finalisation of the long-running liquidations of the Companies.

The preliminary issue: applicability of Pt 5.3A of the Act to the Companies and the plaintiffs

1. The plaintiffs identified in their written submissions a preliminary issue as to whether Pt 5.3A of the Corporations Act is applicable to the Companies and to them as liquidators. The issue arises because, as indicated, each of the Companies was incorporated, and wound up, prior to the Corporations Act.
2. This issue was addressed by Barrett J in In the matter of Equiticorp Australia Limited (in liquidation) [2011] NSWSC 1368, who held at [11] with respect to each of EAL, ETL and Sowani: Each of the four companies with which I am concerned has been, since its initial creation, registered or deemed to be registered under the general companies legislation of New South Wales. At the commencement of the Corporations Act 2001 (Cth), each was registered under Part 2A.1 of the Corporations Law of New South Wales. The effect of s 1378 of the Corporations Act is accordingly that the pre-existing registration has effect as if it were a registration under Part 2A.2 of the Corporations Act itself. Each entity is therefore "a company registered under this Act" as referred to at the start of the definition of "company" in s 9 of the Corporations Act . And, as to EAIL, Barrett J held at [17]: There is also a fifth company: Equiticorp Investments (Australia) Ltd. The circumstances pertaining to it are the same in all respects as those just considered, save that the incorporation of the company before 1989 was under the general companies legislation applying in the Australian Capital Territory and the jurisdiction of this court to make orders in response to the winding up application made in 1989 came from the Companies Act 1981 (Cth) supplemented by the cross-vesting legislation discussed in Rains v Project Technology Pty Ltd (1989) 15 ACLR 609.
3. I agree with that reasoning. By way of elaboration, the analysis which supports that conclusion is as follows, noting that the starting point is the Companies Act 1936 (NSW), since ETL was incorporated under the 1936 Act: 1. ETL: The repeal of the Companies Act 1936 by the Companies Act 1961 (NSW), did not affect ETL's incorporation, given the terms of the savings provision in s 4(5) of the 1961 Act that a company incorporated under the repealed 1936 Act shall be deemed to be incorporated under the 1961 Act. Upon the enactment of the Companies (New South Wales) Code in 1981, ETL was confirmed to have the same status: Companies (Application of Laws) Act 1981 (NSW) s 20. On the enactment of the Corporations Law in 1991, ETL was taken to be a body corporate registered under that instrument: Corporations Law 1991 (NSW), s 1362CB. From 15 July 2001 to the present time, ETL's registration under the Corporations Law has effect as if it were a company under s 1378 of the Corporations Act 2001 (Cth). 2. EIAL was incorporated in the Australian Capital Territory under the Companies Act 1981 (Cth). As with ETL, EIAL was taken to be a body corporate registered under the Corporations Law in 1991, and from 2001 under the Corporations Act. 3. EAL and Sowani were incorporated in New South Wales in 1984 and 1987 respectively under the Companies Act 1981 (Cth), as in force in NSW under the Companies (Application of Laws) Act 1981 (NSW), and known as the Companies (New South Wales) Code. As with ETL and EIAL, they were taken to be a body corporate registered under the Corporations Law in 1991 and from 2001 under the Corporations Act.
4. The next question is whether the plaintiffs are a "liquidator" of a company for the purposes of the s436B of the Corporations Act. Section 436B is concerned with the appointment of an administrator by a liquidator of a "company", that is, a "company" in the sense in which that expression is used in the Corporations Act itself: In the matter of Equiticorp Australia Limited (in Liquidation) at [13]. Given that each of the Companies is a "company" as defined in the Corporations Act, the persons presently holding office as liquidators of those Companies answer the description of a "liquidator" of a company in s 436B(1) of the Corporations Act.
5. This conclusion is supported by the transitional provisions in the companies' legislation. Section 1399 of the Corporations Act has the effect that an appointment of a liquidator under, or for the purposes of, the Corporations Law continues to have effect under the Corporations Act. In turn, s 1362CE of the Corporations Law preserved the effect of acts validly done before its commencement for the purposes of a previous law corresponding to a provision of Chapter 5 (which included the provisions dealing with winding up in insolvency). The effect of these provisions is that the appointment of liquidators to ETL, EAL and Sowani under the Companies (New South Wales) Code and to EAIL under the Companies Act 1981 was preserved under the Corporations Law and again under the Corporations Act.
6. Turning to the relief sought by the liquidators.

(1) Leave for the liquidators to be appointed as voluntary administrators

1. Section 436B(1) of the Corporations Act provides that a liquidator of a company may, by writing, appoint an administrator of a company if he or she thinks that the company is insolvent, or is likely to become insolvent at some future time. Section 436B(2) places a limitation on the exercise of that appointment power. Relevantly, a liquidator cannot appoint himself or herself, or his or her partner or employee without a resolution of creditors or leave of the Court.
2. There is an additional restriction on self-appointment. Section 448C provides, relevantly, that a person must not, except with the leave of the Court, seek or consent to be appointed as administrator of a company or a deed of company arrangement if the person is a partner of an officer of the company. Here, each of the plaintiffs are officers of the company by reason of their present appointment as liquidators and it is accepted that they require leave for the purpose of s 448C to permit their appointment: Re Destra Corporation Limited (Rec & Man Apptd) (in liq) [2009] FCA 1199 at [2].
3. In Deputy Commissioner of Taxation v Foodcorp Pty Ltd (1994) 13 ACSR 796 (Foodcorp) Hodgson J framed the "main question" on an application for leave under s 436B(2)(g) of the Act (at 799) as: … whether the liquidator … is an appropriate person to be an administrator. If he or she is an official liquidator, with no previous association with the company or its officers, and no other ground appears to make the appointment of that person rather than anyone else inappropriate, then, in my view, a court would normally give leave.
4. Hodgson J accepted, as Young J had said in Re Depsun Pty Ltd (1994) 13 ACSR 644, that the court will not give its imprimatur to any step of a procedure which it does not consider to be in the public interest, but did not think there was a heavy onus on the applicant to satisfy the court that the administration and the entry into a deed of company arrangement is in the public interest. That view has been followed in Re Cobar Mines Pty Ltd (rec & mgr apptd) (in liq) (1998) 30 ACSR 125 at 126. Nonetheless, the grant of leave is not a mere formality: Re Keldane Pty Ltd (in liq) [2011] VSC 385 at [13].
5. The concept of appropriateness requires the Court to "consider whether there is any matter such as a conflict of interest, a threat to independence, or anything else offensive to commercial morality" in the proposed appointment: Australian Securities and Investments Commission v Diploma Group Limited (No 5) [2017] FCA 1147 at [40].
6. Relevant considerations include, among others, the proposed appointees' familiarity with the business and affairs of the subject companies; the likely reduction in duplication and associated costs where a liquidator is appointed as administrator including where considerable work has already been undertaken; and where continuity of appointees is desirable having regard to ongoing negotiations and/or complex arrangements: Re Gordon Smith Marketing Pty Ltd (admin apptd) [2016] FCA 1378 at [32(b)]; ASIC v Diploma Group Limited (No 5) at [58].
7. I am satisfied that Mr Kogan and Mr Fraser are appropriately qualified as official liquidators to be appointed administrators of the Companies: s 448B(2).
8. Given that Mr Kogan and Mr Fraser have carried out significant work in progressing the liquidations of the Companies, including formulating the proposed re-structure, I accept that their appointment as administrators is in the interests of creditors of the Companies. In addition to the evidence that their appointment as administrators is supported by the creditors of each of the Companies, I take into account the following matters.
9. First, the appointment of other qualified persons as voluntary administrators, would lead to the duplication of work and additional costs. Second, the present liquidators have a deep understanding of the proposed restructuring transactions. Third, the present liquidators have no real or potential conflict of duty or interest if appointed as administrators.
10. There is also evidence, which I accept, that neither Mr Kogan or Mr Fraser had any previous association with any of the Companies or their officers, prior to their appointment as liquidators.
11. Nor is no there any suggestion that the administration of the Companies would be contrary to the public interest.
12. The plaintiffs have made out a case for the grant of leave under s 436B(2) and also under s 447C.

(2) Section 447A relief

1. Section 447A of the Corporations Act provides that the Court "may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company".
2. In Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at [20], the High Court recognised that the powers of the Court under s 447A of the Act are wide, but not entirely without limit. The relevant limitations were identified at [20] in these terms: Some particular limitations, suggested in the course of argument, must be examined: first, that s 447A does not permit a court to make an order altering the times fixed by those provisions of Pt 5.3A which contain express provision for variation of the time so fixed; second, that it permits only orders having prospective effect; third, that it does not permit the making of orders affecting vested rights; and, fourth, that it does not apply unless there is a continuing administration (or, presumably, an extant deed of company arrangement).

The nature of the s 447A orders sought

1. The plaintiffs seek orders often referred to as "Day 1" orders or "Truncated administration orders", which will modify the operation of Part 5.3A of the Act in relation to the Companies in the following ways.
2. First, that the requirement to hold a first meeting of creditors of the Companies under s 436E of the Act be dispensed with.
3. Such orders are commonly sought, and made, where a liquidator seeks leave to be appointed as administrator: ASIC v Diploma Group Limited (No 5) at [65]; Re Actively Zoned Pty Ltd (in liq) [2012] FCA 605; Re Gordon Smith Marketing Pty Ltd (admin apptd) [2016] FCA 1378. Such orders are appropriate where creditors have already had opportunities to familiarise themselves with the affairs of the relevant companies, and where a first meeting would be a costly administrative burden: Re Gordon Smith Marketing Pty Ltd (admin apptd) at [17].
4. Secondly, that the requirement for Companies' directors to deliver reports to the plaintiffs concerning the Companies' business, property, affairs and financial circumstances under 438B(2) of the Act be dispensed with. Such an order was made in Peter Ngan re JKB Constructions Pty Ltd [2006] NSWSC 1040 at [7].
5. Thirdly, that the meetings required to be held under s 439A of the Corporations Act be able to be held at any time during the convening period for such meetings. Such a modification to the operation of Part 5.3A of the Act would enable the plaintiffs, as administrators, not be required to "sit on their hands" if they are otherwise ready to convene the 439A meetings more quickly than Part 5.3A contemplates: See e.g. Re Destra Corporation at [25].
6. Fourthly, that the plaintiffs accept proofs of debt lodged in the liquidations of the Companies as proofs of debt in the administrations of the Companies, without adjustment for interest. A similar order was made in Re Destra Corporation. There, Lindgren J regarded the course of the plaintiffs accepting proofs previously submitted as being "desirable, efficient and economical" and that to require fresh proofs of debt forms to be submitted would be "superfluous and wasteful": Re Destra Corporation at [5].
7. Fifthly, that s 439C(c) of the Corporations Act, which provides the alternative for creditors of the Companies to resolve at a meeting under s 439A of the Act that the Companies be wound up, not apply. Such an order has been considered appropriate to preserve the possibility of an earlier relation-back day, where a company the subject of a pending winding up petition was placed into voluntary administration: Deputy Commissioner of Taxation v Advant Pty Ltd (admins apptd) [2017] FCA 1123 at [32].
8. The plaintiffs submit, and I accept, that there are sound reasons for the Court to make the orders sought. Those reasons include that: 1. the statutory tasks which would otherwise be required to be carried out by the plaintiffs as voluntary administrators will not further the "Coordinated Distribution" and will require the performance of unnecessary work; 2. the affairs of the Companies have already been the subject of very extensive investigations and reporting; 3. the recovery, investigation and litigation work in relation to the Companies has been completed for some time; 4. the orders sought have been the subject of consideration at meetings of creditors of the Companies, and the orders sought have the unanimous support of those creditors; 5. the orders sought are likely to lead to significant costs savings, in the order of $150,000 - $400,000; 6. the exclusion of the possibility of a resolution under s 439C(c) that the Companies be wound up at the second meetings of creditors would avoid the undesirable scenario where the Companies proceed in two parallel liquidation procedures under the Companies Code and the Act; 7. the orders sought will facilitate the object of Part 5.3A in relation to the Companies, through the business, property and affairs of the Companies being administered in a way that results in a better return for the Companies' creditors and members than would result from an immediate winding up; and 8. none of the relief sought falls within any of the particular limitations referred to in Australasian Memory Pty Ltd v Brien, and there is no discretionary reason why the relief would not be granted.
9. The plaintiffs have made out a case for truncated administration orders by way of s 447A relief.

(3) Directions under s 90-15

1. The plaintiffs also seek directions under s 90-15(1) of the Insolvency Practice Schedule (Corporations), which provides that the Court may make such orders as it thinks fit in relation to the external administration of a Company. That includes, without limitation, an order determining any question arising in the external administration of a company: s 90-15(3).
2. The specific direction which the plaintiffs seek is that they would be justified in acting in the following manner in the administration of the Companies: 1. not requiring or receiving any "Report as to Affairs" (RATA) or "Report on Company Activities and Property" (ROCAP) from any directors or past directors of the Companies; and 2. not conducting investigations into, or reporting to creditors about, possible recovery actions that may be available in the event that any of the Companies were to proceed into liquidation under the Act.
3. In Reidy, In the Matter of eChoice Limited (Admin Apptd) [2017] FCA 1582, Yates J at [27] proceeded upon the basis that an application by an administrator for directions, that formerly would have been made under s 447D(1) of the Corporations Act (now repealed), would fall within the purview of the statutory power in s 90-15 to make an order that determines a question arising in the external administration of a company. There is no reason to depart from that approach.
4. It is well established that the function of an administrator's application for directions is to give the administrator advice as to the proper course of action to take in the administration. As Goldberg J explained in Re Ansett Australia Limited and Korda (No 3) [2002] FCA 90; (2002) 115 FCR 409 at [44]: When liquidators and administrators seek directions from the Court in relation to any decision they have made, or propose to make, or in relation to any conduct they have undertaken, or propose to undertake, they are not seeking to determine rights and liabilities arising out of particular transactions, but are rather seeking protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct. They can obtain that protection if they make full and fair disclosure of all relevant facts and circumstances to the Court. In Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674, McLelland J said at 679-680: The historical antecedents of s 479(3) ..., the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator's application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitrary form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction. Modern Australian authority confirms the view that s 479(3) 'does not enable the court to make binding orders in the nature of judgments' and that the function of a liquidator's application for directions 'is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company's transactions before the liquidation': [cases cited omitted].
5. Here the administrators seek a direction on a legal issue of substance or procedure. That is an appropriate subject matter on which directions may be given under s 90-15: Re Ansett at [65].
6. I accept that there is no utility in requiring a RATA or ROCAP, nor in conducting the investigations and making reports to creditors concerning possible recovery actions in the event that any of the Companies were to proceed into liquidation. The Companies had been in liquidation for nearly 30 years.
7. The directions sought are also appropriate in that they complement the relief sought under s 447A of the Corporations Act, specifically that the operation of Pt 5.3A in relation to the Companies be modified, by dispensing with the requirements of s 438B(2) and that s 439C not apply.

(4) Stay of the liquidations

1. In the event that the Companies are placed in voluntary liquidation, the plaintiffs seek a stay of the present liquidations. Such an order is appropriate. The question which arises is whether the applicable provision is s 383 of the Companies (New South Wales) Code or s 482 of the Corporations Act which substantially reproduces s 383 of the Code. Section 383 provides, relevantly: (1) At any time during the winding up of a company, the Court may, on the application of the liquidator or of a creditor or contributory, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a date specified in the order.
2. With respect to EAL, ETL and Sowani, the applicable provision is s 383 of the Companies (New South Wales) Code because the winding up of EAL, ETL and Sowani continues to be governed by the Companies (New South Wales) Code, by the combined force of s 601 of the Corporations Law and s 1408 of the Corporations Act: Re Tahore Holdings Pty Ltd [2004] NSWSC 397; (2004) 49 ACSR 550.
3. With respect to EIAL, which is incorporated in the Australian Capital Territory and was wound up by an order of the Supreme Court of the Australian Capital Territory, this Court has jurisdiction to stay the liquidation of EIAL under s 383(1) of the Companies Act 1981 (Cth) in the exercise of its cross-vested jurisdiction given by s 4(3) of the Jurisdiction of Courts (Cross vesting) Act 1993 (ACT): Rains & Anor v Project Technology Pty Ltd (1989) 97 FLR 355 at 358; 15 ACLR 609; In the matter of Equiticorp Australia Limited (in liquidation) at [17] (Barrett J).
4. The power to grant a stay of the liquidation is discretionary. Relevant considerations on such an application were identified by Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533. It is not necessary to refer to subsequent authorities which have restated these considerations. Addressing the relevant considerations in the present case.
5. First, as indicated above at [8], the plaintiffs have developed the Model and the proposed restructuring transactions in concert with their counterpart appointees and in consultation with creditors of the Companies. There is a positive case for the favourable exercise of the Court's discretion because the purpose of the proposed administration and deeds of company arrangement is to avoid the circularity of distributions which would otherwise occur, which is to the benefit of creditors of the Companies. I accept that the continuation of the liquidations while that occurs would be duplicative and wasteful.
6. Second, Mr Kogan has given evidence of the nature and extent of the Companies' assets and creditors. There is no suggestion, and the plaintiffs do not contend, that the Companies are solvent. Rather, the stays are sought to facilitate the proposed restructuring transactions and finalise the external administrations, rather than restore the Companies to ordinary trading operations.
7. Third, the orders sought - including a stay of the winding up of each of the Companies - have the unanimous support of the Companies' creditors, and the support of the liquidators.
8. Fourth, given the purpose for which the stays are sought, I accept that it is not necessary to consider the current trading position and general solvency of the Companies.
9. Fifth, given the long history of the external administrations of the Companies, and that it is not proposed that the Companies will return to the control of their directors, I also accept that it is not necessary to address the issue of any non-compliance by the directors with their statutory duties.
10. Sixth, the history of the liquidations is addressed in some detail in Mr Kogan's evidence. It is not necessary to refer to the detail of that evidence.
11. Seventh, given the long history of the liquidations and the evidence of the investigations by previous liquidators, I accept that it is not necessary to address the nature of the company's business and whether the conduct of the company was in any way contrary to "commercial morality" or "the public interest".
12. I am satisfied that the liquidation of the Companies should be stayed upon the Companies being placed into voluntary administration.

Orders

1. The Court makes the following orders and directions: 1. Pursuant to s 436B(2)(g) and s 448C(1) of the Corporations Act 2001 (Cth) (the Act), leave be granted for the plaintiffs to be appointed as: 1. administrators jointly and severally of each of Equiticorp Australia Limited (in liquidation) (EAL), Equiticorp Tasman Limited (in liquidation) (ETL), Equiticorp Investments (Australia) Limited (in liquidation) (EIAL) and Sowani (No. 2) Pty Limited (in liquidation) (Sowani) (together the Companies); and 2. deed administrators of any deed of company arrangement entered into by any of the Companies in the course of their administration by the plaintiffs as administrators. 1. Pursuant to s 447A of the Act, Pt 5.3A of the Act is to operate in relation to the administration of each of the Companies (and any administration of a deed of company arrangement made in relation to any of the Companies), on the following terms (with these orders to prevail to the extent of any inconsistency with the provisions of Pt 5.3A of the Act): 1. there is no requirement that a first meeting of creditors in the administrations of each of the Companies be convened or held; 2. s 438B(2) of the Act does not apply to the plaintiffs' administrations of the Companies; 3. the plaintiffs (as Administrators) may convene and hold the meetings required under s 439A of the Act at any time during the convening period (as defined in the Act), provided always that notice of such meetings must be provided in accordance with r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth); 4. in and for the purposes of the plaintiffs' administrations (pursuant to Pt 5.3A of the Act) of the Companies, the plaintiffs accept as proofs of debt in the administrations of the Companies any proofs of debt submitted by creditors in the course of the liquidations of the Companies conducted by the plaintiffs (and their predecessors) as liquidators, without adjustment for interest in respect of the claims the subject of such proofs of debt; and 5. s 439C(c) of the Act does not apply to the plaintiffs' administrations of the Companies. 1. Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (being Sch 2 to the Act), a direction that the plaintiffs as administrators of the Companies are justified in: 1. not requiring or receiving a "Report as to Affairs" or "Report on Company Activities and Property" from any of the directors (or past directors) of the Companies; and 2. not conducting investigations into, and reporting to creditors about, possible recovery actions that may be available in the event that any of the Companies were to proceed into liquidation under the Act pursuant to Div 12 of Pt 5.3A of the Act. 1. Pursuant to s 383 of the Companies (New South Wales) Code, the winding up of each of EAL, ETL and Sowani be stayed in each case from the time that the plaintiffs appoint themselves administrators of such company, until further order of the Court. 2. Pursuant to s 383 of the Companies Act 1981 (Cth), the winding up of EIAL be stayed from the time that the plaintiffs appoint themselves administrators of such company, until further order of the Court. 3. The plaintiffs' costs of and incidental to this application be costs in the liquidation of the Companies, and are to be paid out of the assets of the Companies.

Amendments 17 March 2020 - Amendment to jurisdiction - not visible 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: 17 March 2020