Awada v Linknarf Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

1 Before the court are applications by Mr Vouris and Mr Godfrey, partners in the firm of insolvency practitioners, Vouris & Bell, chartered accountants. Each is a registered liquidator and Mr Vouris is also an official liquidator, although Mr Godfrey is not. 2 The applications are brought before the Court in consequence of a decision of the Company Auditors and Liquidators Disciplinary Board suspending Mr Vouris's registration as a liquidator for a period of three months. That period will begin tomorrow and Mr Vouris has taken steps, in anticipation of his inability to continue to act, to put in place alternative arrangements for the several administrations in which he currently holds appointments. Those steps involve appointment in Mr Vouris's place of his partner, Mr Godfrey, or one of two other practitioners holding the requisite qualifications, Mr Gidley and Mr Tolcher. These three gentlemen between them will, it is proposed, assume all the roles which Mr Vouris is to relinquish. 3 The circumstances of this case are very similar to those with which Palmer J dealt in Re Andrew Hugh Jenner Wily [2003] NSWSC 1260. Much of his Honour's reasoning in that case will be applicable here as well, although there are some differences to which it will be necessary to refer. 4 The appointments held by Mr Vouris were dealt with upon the hearing of the application in groups according to the source and nature of appointment. It is convenient to discuss relevant matters and state conclusions by reference to those groups, although the orders will, of course, need to deal with specific appointments and specifically named entities. 5 The first group of cases consists of those in which Mr Vouris is a liquidator appointed by a capital "C" Court under the Corporations Act. In each such case, Mr Vouris is the sole liquidator and issues relevant to a case of joint appointment do not arise. Mr Vouris has, in each case, signed a form of resignation to take effect tomorrow. There is under s.473(1) an explicit power for a liquidator appointed by the Court to resign. It is that power that Mr Vouris exercises by the resignations already signed. A vacancy will arise in the office of liquidator in each case when Mr Vouris's resignation becomes effective. That will be a vacancy in relation to which the power of the Court to make an appointment under s.473(7) is exercisable. On one reading, it might be thought that the Court should not make an order under s.473(7) until the vacancy has actually arisen by the resignation's taking effect. For my own part, I am satisfied that the Court may make an order under s.473(7) by reference to a vacancy that will arise at a particular future time by force of a resignation that has already been signed and is before the Court as Mr Vouris's several resignations are in this case. 6 The appropriate form of order in relation to each case in the first group, as I see it, will be an order that the vacancy to arise from the resignation already in existence, which is to take effect on the 6 May 2004, be filled by the appointment of the particular person proposed for appointment. This accords with the approach taken by Palmer J in Wily. In each of these cases, it is proposed that either Mr Tolcher or Mr Gidley be appointed, each of them being an official liquidator qualified to act as a court appointed liquidator. 7 I turn then to the second group. It consists of the cases in which Mr Vouris is liquidator under a voluntary winding up. There are, within this group, two subgroups, one relating to creditors voluntary windings up and the other to members voluntary windings up. Some of Mr Vouris's appointments in this group are sole appointments, while others are appointments of Mr Vouris jointly with Mr Godfrey. 8 I deal first with the sole appointment cases. Again, Mr Vouris will resign and there are before the Court documents signed by Mr Vouris by which he resigns with effect from 6 May. In the case of both members voluntary winding up and creditors voluntary winding up, the ability of a liquidator to resign is recognised by clear implication: see s.495(3) in the case of members voluntary winding up and s.499(5) in the case of creditors voluntary winding up. Each of those sections also refers to a method of appointing a replacement or successor. In the case of members voluntary winding up, a power of appointment resides in the company in general meeting while in the case of creditors voluntary winding up the power is exercisable at a meeting of the creditors. There also exists within Part 5.5 a quite separate and distinct power under which the Court may appoint a liquidator in a voluntary winding up. That power is conferred by s.502. Section 502 is within division 4 of Part 5.5, headed "Voluntary Winding Up Generally". It says, quite simply: "If from any cause there is no liquidator acting, the Court may appoint a liquidator." 9 The provision under which a general meeting may appoint a replacement or successor liquidator in the case of members' voluntary winding up being, as I have said, s.495(3), is within Division 2 of Part 5.5 headed "Members Voluntary Winding Up". Likewise, the corresponding power vested in a meeting of creditors in the case of a creditors voluntary winding up, being the power under s.499(5), appears in Division 3 of Part 5.5 under the heading "Creditors Voluntary Winding Up". 10 I had occasion, in Awada v Linknarf Ltd (2002) 55 NSWLR 745, to consider the interaction between the several Divisions of Part 5.5 and, in particular, the force to be given to the headings of those divisions. Having regard to that analysis, I am satisfied that the s.502 power should be regarded as in the nature of an overarching power exercisable by the Court in any circumstance of vacancy in the office of liquidator in any voluntary winding up, even though a power leading to the same result might also be exercisable by a general meeting or a meeting of creditors under the Division dealing specifically with the particular type of winding up. I consider that overarching power to be exercisable by the Court in both types of voluntary winding up, despite the existence of the concurrent or separate power in each of Divisions 2 and 3. 11 In circumstances of the kind with which I am dealing here, it would be unduly expensive and inconvenient to have to convene meetings to put to members or creditors of every relevant company the question of appointment of a successor or replacement liquidator. The incumbent liquidator finds it necessary to relinquish office and has taken the step of asking the Court to ensure continuity of administration in a way that avoids that expense and inconvenience for members and creditors. The Court can, and should in this case, exercise the overarching power under s.502 and I note that, in the Wily case, Palmer J made an order under that section following s.459(3) resignation (there were apparently no instances involving members voluntary winding up before Palmer J). In the most unlikely event that the new appointee is for some reason not favoured by the members or creditors of a relevant company, they can, of course, approach the Court under s.503 with a view to some other appointment being substituted. 12 I turn now to the cases of voluntary winding up where Mr Vouris and Mr Godfrey are liquidators jointly, a situation which did not arise in Wily. The Corporations Act is apparently silent on the effect of the resignation of one of several jointly appointed liquidators, whether in the case of members' voluntary winding up or in the case of creditors' voluntary winding up. There is no reason to think, however, that the respective powers to resign, clearly recognised in the way I have described, does not extend to one of several jointly appointed liquidators. Where such a resignation occurs, it may be that the remaining liquidator or liquidators simply carry on by virtue of the original appointment. 13 There are, however, some contrary indications at page 297 of the fourth edition (1999) of McPherson's "Law of Company Liquidation" by Keay. The commentary there refers to difficulties that can arise where one of two joint liquidators dies: see footnote 237. The situation where, as here, one of two joint liquidators resigns is, of course, analogous and must be regarded as giving rise to whatever difficulties arise in the case of the death of one. It is suggested at footnote 237 that the proper course in such a case is to appoint another liquidator to act jointly with the survivor or, as an alternative, to have the survivor removed and reappointed by the Court as sole liquidator. The latter proposition is supported by reference to Re Aplin Brown and Co Limited [1902] StR Qd 67, a decision of Sir Samuel Griffith, then Chief Justice of the Supreme Court of Queensland. Mr Eassie took me to the report of Re Aplin Brown & Co Limited and in particular to the provisions of the then Companies Act of Queensland on the subject. It is fair to say that those provisions are sufficiently analogous with and similar to the provisions of the present Corporations Act to warrant the conclusion that any difficulties of the kind suggested by McPherson as arising under them also conceivably arise under the present provisions. 14 In the end, I think this is a matter into which I do not need to delve to any great extent because it can be dealt with quite simply by making an order of the kind that was made by Sir Samuel Griffith, being, in the present context, an order to take effect after Mr Vouris's resignation as one of the two joint liquidators and to the effect that, at that point, Mr Godfrey, the remaining liquidator, be removed pursuant to s.503 that Mr Godfrey be appointed sole liquidator pursuant to that section. 15 There is one question about this approach that needs to be mentioned briefly. Section 503 is in the nature of an omnibus provision which enables the Court to remove a liquidator and appoint "another liquidator". The two acts - removal and appointment - are linked in such a way as to suggest that, where the s.503 jurisdiction is exercised, both removal and appointment must be made together. The words used in the part of the section dealing with appointment are "another liquidator". It is conceivable that this means some liquidator other than the liquidator who is at the same time removed, and in the general run of cases that will be what actually happens, given that the section is principally concerned with removal of liquidators for misconduct or the like, so that it deals with cases where it has been established to the court's satisfaction that it is inappropriate for the existing liquidator to continue. 16 I am not convinced, however, that "another liquidator" means the same as "another person as liquidator". Rather, it seems to me "another liquidator" has regard to the fact that by virtue of the removal there will be no liquidator and a need for a liquidator will exist, which may be filled by appointment of any qualified person. It is in the sense of a liquidator in succession to the original liquidator that the section uses the word "another". I note, in passing, that in s.449D(1) to which I shall come in a moment, the words used are "someone else", clearly indicating a different person. There is not, in my opinion, any equivalent indication in s.503. 17 Having regard to all these matters, the best course will be to make, as I have said, an order of the kind in Re Aplin Brown and Co Limited in respect of Mr Godfrey, being an order expressed to take effect when Mr Vouris's resignation as one of the joint liquidators takes effect. 18 The next group of cases to be dealt with is those in which Mr Vouris holds appointment as administrator of a deed of company arrangement under Part 5.3A. Again there are some appointments of Mr Vouris alone and others in which he was appointed jointly with Mr Godfrey. In relation to the cases where Mr Vouris alone holds office as deed administrator, the matter can be dealt with in a quite straightforward way by reference to s.449D(1). That section expressly contemplates a situation where a deed administrator resigns by notice in writing given by the company and empowers the Court to appoint "someone else" as administrator of the deed. This section can accommodate the sole appointment cases by way of an order appointing Mr Godfrey to be administrator upon Mr Vouris's resignation becoming effective on 6 May. 19 The cases where Mr Vouris is one of two deed administrators with Mr Godfrey can, in my opinion, also be dealt with under s.449D(1) on the basis that the reference to the administrator in that section should be taken to include a reference to one of several administrators. However, in case there is any doubt about this and considerations of the same kind as have arisen in relation to joint appointment as liquidator in the voluntary winding up cases apply, resort can be had to the very broad powers conferred on the Court by s.447A to fashion an order that upon Mr Vouris's resignation as one of two administrators taking effect, the remaining administrator, Mr Godfrey, and a second person named in the order are together to be the administrators of the deed of company arrangement. 20 The final group of cases involves receiverships. Mr Vouris has been appointed a receiver by the court in respect of the assets of two partnerships. His appointment is sole. In this instance, as Palmer J observed in the Wily case, appropriate jurisdiction of the Court is to be found in Part 29 rule 5 of the Supreme Court Rules. There is no power for a receiver to resign, but the Court has jurisdiction, whether under Part 29 or as an element of its inherent jurisdiction, to discharge a receiver. There is no reason why a receiver should not be discharged at his own request, in circumstances of the kind that prevail here. The power to discharge is in Part 29 rule 5 (1)(c). There is also a power to appoint another receiver. This is in Part 5, rule 5 (1)(d). A combination of those paragraphs allows the Court to make an order that with effect on and from 6 May 2004 Mr Vouris be discharged as receiver in each relevant case and that the person proposed for appointment in his place be appointed to be receiver. 21 That completes my consideration of the ways in which the various classes of appointment will appropriately be dealt with from a procedural perspective. So far as the merits of the proposed new appointments are concerned, there is little that needs to be said. The proposed appointee in each case is Mr Godfrey, Mr Gidley or Mr Tolcher. Each has delivered the appropriate form of consent and those consents have been put into evidence. Each professes himself unaware of any barrier to his appointment and each is duly qualified to take the appointment that it is proposed he take. Evidence has been given of plans to ensure orderly transition. There is no reason why the appointments should not be made. 22 It is necessary to deal finally with one anomalous case which concerns the winding up by the Court of Country Contact Club Pty Ltd. This Court ordered, on 29 July 2003, that that company be wound up and that Mr Godfrey be appointed liquidator. The circumstances in which Mr Godfrey came to be named in the order as liquidator are unusual. It was not intended that he should be appointed since, as I have said, he does not have the qualification to be a court appointed liquidator. 23 In evidence before me is the form of consent that was put before the Court by the applicant for a winding up order in respect of Country Contact Club. That form of consent to act as liquidator is signed by Mr Vouris. By means which are unexplained, however, Mr Godfrey's name appears in the body of the consent form carrying Mr Vouris's signature. The form of notice to liquidator of appointment, prepared by the solicitors for the applicant for winding up, named Mr Vouris as liquidator, consistently with an intention that Mr Vouris should have been appointed. The copy of that document in evidence, however, makes it clear that when the form prepared by the applicant's solicitors was presented in the registry, an amendment was made by crossing out Mr Vouris's name and inserting Mr Godfrey's name, that, of course, being consistent with the order that had been made - no doubt by reference to the name typed into the form of consent to act without regard to the signature at the foot of that consent to act. 24 It is clear to me that the applicant for winding up intended to tender to the court a consent of Mr Vouris. The consent tendered was signed by Mr Vouris but had Mr Godfrey's name rather than Mr Vouris's name typed into it. It may, therefore, fairly be regarded as having operated as a consent of Mr Vouris. Indeed, it could not have operated as a consent of Mr Godfrey whose signature was not on it. The Court must, in my opinion, be presumed to have intended to appoint an official liquidator qualified to act in a court ordered winding up, being the official liquidator who had signed the consent, namely Mr Vouris. 25 The winding up order should be rectified. The power to rectify may be found in Part 20 rule 10 ("the slip rule") supplemented, if necessary, by an analogous aspect of the Court's inherent jurisdiction. Relevant tests are referred to in cases such as Gikas v Papanayiotou (1977) 2 NSWLR 944 and Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446. As explained by McHugh JA in the latter case, one asks the question "if the matter had been drawn to the court's attention would the correction at once have been made?" The answer, in this case, is a clear "yes". A rectifying order should be made to take effect before the orders which cause a new liquidator to replace Mr Vouris in the Court appointed winding up of Country Contact Club. 26 Because Mr Vouris's suspension begins tomorrow and he has already executed and placed before the court the several resignation documents effective tomorrow, it is necessary that orders be made at once to ensure smooth transition. The short minutes that have been prepared do not accommodate all of the aspects to which I have just referred. Revised short minutes should be prepared and these should be brought to court at 2.30 today so that the orders can be made.

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