- Australian Securities and Investment Commission v Sino Australia Oil and Gas Ltd

Determination

I turn now to the question whether, but for the appointment of voluntary administrators to the companies, provisional liquidators would be appointed to them. Mr White draws attention to several matters which would support such an appointment, and no party has made submissions, or led evidence, that took issue with those matters. Mr White submits that a winding up application is on foot in these proceedings, and that there are good arguable grounds for a winding up. It seems to me that that submission is made good, without reaching any final view as to the ultimate merits which are a matter for trial, because there is evidence of several transactions raising an arguable case for the diversion of assets from the companies, including to Austructures, and evidence of a proposal for the remaining assets of the companies now to be split between Mr Boros and Mr Thatcher, to which reference is made, for example, in Mr Wheeler's evidence, and which is consistent with the evidence of a transfer of shares in Austructures to which I have referred above. Plainly, there is also an arguable case that the companies could be wound up on the just and equitable grounds, both so far as there is a breakdown in trust and confidence between their directors and their shareholders, and so far as those transactions are concerned. Mr White also points out, and I accept, that the Court should proceed on the basis that the companies are at least likely to become insolvent if they are not actually insolvent, because that was the statutory basis for the appointment of voluntary administrators and, in the case of Phire, Mr Langdon's evidence is that the company is presently insolvent. Those matters suggest that there is a good arguable case for the winding up of the companies at a final hearing although I again emphasise, the Court will not determine that question on a final basis in an application of this kind.
Next, the question arises as to the balance of convenience and whether there is reason to appoint a provisional liquidator to the companies. It seems to me that the extent of transactions with company assets, including the evidence raising an arguable case as to the diversion of assets to Austructures, provides a basis for the appointment of a provisional liquidator, in order to preserve any remaining assets in the companies against the risk of further diversion, potentially, implemented by the sale of assets at undervalue within the voluntary administration process. Second, it seems to me that there are strong grounds for an independent investigation of the relevant transactions, which a provisional liquidator could undertake in the period pending a winding up application. The period of time available to a provisional liquidator, and the nature of his or her role, is such that he or she would have a greater focus on investigation, than a voluntary administrator would likely have within the relatively confined timetable available for a voluntary administration.
I now turn to the application of s 440A(3) of the Act, which applies when a company is under voluntary administration and the Court is satisfied that it is in the interests of the relevant company's creditors for the company to continue under administration rather than have a provisional liquidator appointed. I cannot reach that state of satisfaction for several reasons. The widest of those reasons, which applies in respect of each of the companies, including that to which Mr Gothard and Ms Duggan have been appointed as voluntary administrators, is that the voluntary administration process ultimately leads to a second meeting of creditors. There is a real possibility, raised by evidence of the conduct of the first meeting of creditors in respect of Sales, that those meetings may well proceed on a basis that PPI is not permitted to vote, and is therefore deprived of any voice in the outcome, notwithstanding its position as a contributory of the companies with substantial claims in these proceedings and those meetings are dominated by Mr Boros, Mr Thatcher and their associates. It also seems to me that the Court could not be satisfied, in circumstances where a winding up application on the grounds of oppression and the just and equitable grounds is well advanced, raises a seriously arguable case and is shortly to go to hearing, that it is in the interests of creditors generally that the voluntary administration be conducted, and its outcome ultimately determined by those creditors admitted to vote at the second meeting of creditors, rather than that a provisional liquidation take place, where the provisional liquidator would be an officer of the Court, appointed by the Court and subject to the Court's supervision. The independence of the provisional liquidator and his or her status as an officer of the Court seems to me to be a significant protection for creditors' interests in that situation.
There are also other grounds, which do not apply to all of the companies, on which it seems to me that the Court could not be satisfied that it is in the interests of the creditors for the companies to continue under administration. In respect of Sales, there are at least questions as to Mr Cant's independence, given his long relationship with the Pages Hire Group and the previous advisory role he has had in respect of that Group, and it is plain that Mr Thatcher has advised at least one third party and potential participant in a sale process that Mr Cant is a "friendly administrator". I again emphasise that I do not reach any finding as to the truth of that proposition, but it seems to me that the fact that Mr Cant has been portrayed in this way and that that proposition may be regarded by third parties as plausible, given Mr Cant's history as an adviser to the Group and as the deed administrator of a previous deed of company arrangement proposed by Mr Boros for Phire, will undermine any sales process that he undertakes. In those circumstances, it seems to me that it cannot be in the interests of Sales' creditors generally that any such process go forward under Mr Cant's control, by comparison with the position if a provisional liquidator is appointed, subject to the Court's control.
The position in respect of Phire turns on narrower questions because, as I have noted above, the evidence does not raise any question as to the independence of Mr Vince and Mr Langdon and they have fairly recognised that Phire should be placed in liquidation by reason of its insolvency. However, I am also not satisfied that it is in the interests of Phire's creditors for it to continue in a separate voluntary administration rather than for the same provisional liquidator to be appointed as to PEH and Sales for two reasons. First, there may well be advantages, given the structure of the Pages Hire Group, and the extent of transactions between Companies within it that require investigation, for a single provisional liquidator to be appointed to all three companies. It cannot be assumed that Mr Langdon and Mr Vince would have access, in their capacity as voluntary administrators or liquidators of Phire alone, to documentation that will disclose the relevant transactions, where that documentation may be held in other companies within the Group.
Second, as Mr Giacco, who appeared for Mr Langdon and Mr Vince fairly recognised, the activities of Phire, to the extent they previously existed and to any extent that they still exist, were conducted in New South Wales. Mr Langdon and Mr Vince practice in Dandenong, Victoria, and there would be significant practical difficulties for them, during the COVID-19 pandemic, in undertaking a voluntary administration of a company based in New South Wales. Mr Giacco fairly submits that, in some circumstances, voluntary administrators can conduct themselves by the way of the use of interstate agents. While I accept that proposition as a general matter, there seems little reason to take that course in respect of a company which conducted business in New South Wales solely because its directors chose to appoint an administrator who practices in Victoria, where that course would likely add additional costs to the conduct of the administration.
For those reasons, I also cannot be satisfied that it is in the interests of Phire's creditors for Mr Vince and Mr Langdon to continue as administrators of Phire. On balance, notwithstanding that there is no issue as to their independence raised in their application, it seems to me preferable that the same provisional liquidators practising in New South Wales be appointed for all three companies, and Messrs Vince and Langdon should not be left as separate voluntary administrators to or be appointed as separate provisional liquidators to Phire.
I do not neglect Mr Boros' submission that it would be disadvantageous to the companies' employees to have a provisional liquidator appointed. That submission is, however, unsupported by evidence, including as to the number or status of such employees and depends on speculation, both as to what will occur in respect of such employees in a voluntary administration, particularly if a sale of assets occurs at undervalue, and what would occur in respect of a provisional liquidation. There is no evidentiary basis, as matters stand, to assume that the outcome for employees will be any better in a voluntary administration, particularly if the companies are in truth insolvent, than in a provisional liquidation.
For these reasons, I will order that Mr Gothard and Ms Duggan be appointed provisional liquidators jointly and severally of the Second, Third and Fifth defendants, PEH, Sales and Phire. In those circumstances, I will also make an order that the voluntary administration of each of those companies terminate. It is plain that the Court has power to make such an order under s 447A of the Act or s 90-15 of the Insolvency Practice Schedule (Corporations) being Schedule 2 to the Corporations Act. I am satisfied that the purposes of Part 5.3A of the Act will be promoted by the making of that order. Once a provisional liquidator is appointed to the companies, the continued appointment of voluntary administrators to the companies would have no useful purpose.
I note that PPI sought an order that Mr Boros, as one of the directors who had appointed the voluntary administrators to these three companies, pay the costs of this application. It seems to me preferable that I do not determine that question at this point, where the substantive proceedings remain to be heard. I will order that the costs of the application be reserved.
For these reasons I make the following orders: 1. Mr Peter Gothard and Ms Robyn Duggan of KPMG be appointed provisional liquidators jointly and severally of Pages Equipment Holdings Pty Ltd (admin apptd); Pages Sales Pty Ltd (admin apptd); and Phire Pty Ltd (admin apptd). 2. The voluntary administration of each of Pages Equipment Holdings Pty Ltd, Pages Sales Pty Ltd and Phire Pty Ltd terminate with immediate effect from the appointment of the provisional liquidators. 3. The costs of the application be reserved. 4. These orders be entered forthwith.

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