Carr v Darren Berry International Marine Pty Ltd

REASONS FOR JUDGMENT 1 On Friday 25 October 2013 I appointed Mr Darren John Vardy and Mr Terry Grant van der Velde as the joint and several provisional liquidators of the first defendant Darren Berry International Marine Pty Ltd ('DBI') and did so ex parte on the application of a creditor, the plaintiff, Mr Peter Carr. These are my reasons for that decision. 2 Section 472(2) of the Corporations Act 2001 (Cth) ('the Act') empowers the Court to appoint a liquidator to a corporation provisionally 'at any time after the filing of a winding up application and before the making of a winding up order …'. On 11 October 2013 Mr Carr filed a winding up application in the Sydney registry of this Court. That application had not been yet been determined and was listed for its first directions hearing on 8 November 2013 before a Registrar. The power in s 472(2) is, therefore, enlivened. 3 The appointment of a provisional liquidator is a drastic remedy and a serious intrusion into the affairs of a company. Although the proper exercise of the discretion conferred by s 472(2) is informed by the seriousness of the power, the law in this area also stresses the breadth of the potential circumstances which might warrant its exercise. The authorities are, with respect, very usefully collected and assayed by Brereton J in Grace v Grace (2007) 25 ACLC 141 at 147-149 [26]-[35]; [2007] NSWSC 6. Largely there is a loose analogy with the principles regarding the grant of urgent injunctive relief: there must be a reasonable prospect that a winding up will ultimately be made and the balance of convenience must favour the making of the order. 4 Here there is a strong case that a winding up order will be made. The application filed seeks a winding up in insolvency. The ground relied upon is a failure to comply with a statutory demand. The evidence before me establishes that Mr Carr's solicitor caused to be served a statutory demand upon DBI on 10 September 2013 demanding the payment of $817,250.67. The solicitors for DBI canvassed with Mr Carr's solicitors the possible existence of various bases for setting the statutory demand aside but, in the events which occurred, no application to set aside the statutory demand was made within the requisite 21 day period required under the Act (or at all) and, in consequence, the Court is required to presume that DBI is insolvent: s 459C(2)(a). Further, by reason of s 459S of the Act, DBI is now barred in the winding up proceeding from relying upon any ground it could have relied upon to set aside the statutory demand if it had brought such an application other than by leave of the Court. Even then, that leave cannot be granted unless the ground is material to solvency: s 459S(2). DBI therefore faces a difficult, although not necessarily insurmountable, task in avoiding being wound up. The prospects of it being wound up are, on the other hand, substantial. 5 The balance of convenience strongly supports the appointment of provisional liquidators because there is a significant risk that assets of the company are being dissipated. The person standing behind DBI is a Mr Darren Berry. Mr Berry is the sole director of DBI. The business of DBI appears to involve the sale of motor yachts. Mr Carr purchased a motor yacht from DBI for USD$758,000 F.O.B. Shanghai. Mr Carr appears to have handed over that sum in return for something which was not the original bill of lading. DBI has been unable to produce the yacht claiming that the boat builder sold the boat to someone else and that DBI is unable to get the money back. 6 After the statutory demand was served, but within the 21 day period before the presumption of insolvency arose, Mr Carr's solicitor had a discussion with the solicitor acting for DBI and Mr Berry. DBI's solicitor sought to persuade Mr Carr's solicitor that pursuing DBI or Mr Berry was pointless apparently saying words to the following effect: My client does not have any personal assets, and everything is structured so that nothing is exposed. What are the particulars of the fraud? 7 I infer from this that Mr Berry does not have any assets to speak of. On 3 October 2013 Mr Carr became aware that Mr Berry appeared to be selling two expensive race cars through a specialist agent. The vehicles were an Ascari KZR 1 GT3 and a Ginetta G50 GT4. The evidence before me suggested they are worth in the vicinity of $245,000. Since Mr Berry does not have any assets to speak of, it is at least arguable that the cars belong to DBI. Viewed from that perspective, one non-trivial interpretation of events is that Mr Berry is stripping the assets out of DBI to avoid having to pay Mr Carr anything. 8 Ordinarily I would have not made the orders sought ex parte. However, the potentially fraudulent nature of what is taking place (of course, I make no final determination of that matter) combined with the inherent mobility of the chattels in question made proceeding in the ordinary way impractical. The appointment of a provisional liquidator ex parte is an extreme measure only to be countenanced where no other solution is available. I am satisfied that this is one of those cases. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.