CBA Corporate Services (NSW) Pty Limited v Walker and Moloney, in the matter of ZYX Learning Centres Limited

IN THE MATTER OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) aCn 079 736 664 and THE COMPANIES LISTED IN SCHEDULE 2 BETWEEN: CBA CORPORATE SERVICES (NSW) PTY LIMITED ABN 25 072 765 434 AND THE COMPANIES LISTED IN SCHEDULE 1

AND: PETER WALKER AND GREGORY MOLONEY IN THEIR CAPACITY AS THE LIQUIDATORS OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND OF THE COMPANIES LISTED IN SCHEDULE 2

ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND THE COMPANIES LISTED IN SCHEDULE 2

JUDGES: FOSTER, BARKER & GRIFFITHS JJ DATE OF ORDER: 12 July 2013 WHERE MADE: SYDNEY

1. The appeal be dismissed.
2. The appellants pay the respondents' costs of and incidental to the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 601 of 2012

IN THE MATTER OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) aCn 079 736 664 and THE COMPANIES LISTED IN SCHEDULE 2 BETWEEN: CBA CORPORATE SERVICES (NSW) PTY LIMITED ABN 25 072 765 434 AND THE COMPANIES LISTED IN SCHEDULE 1

AND: PETER WALKER AND GREGORY MOLONEY IN THEIR CAPACITY AS THE LIQUIDATORS OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND OF THE COMPANIES LISTED IN SCHEDULE 2

ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND THE COMPANIES LISTED IN SCHEDULE 2

JUDGES: FOSTER, BARKER & GRIFFITHS JJ DATE: 12 July 2013 PLACE: SYDNEY

Introduction 1 These proceedings arise from the collapse of a group of companies known as the ABC Learning Group, which went into voluntary administration on 6 November 2008. At that time the ABC Learning Group was the largest operator of childcare centres in Australia. It employed over 14,500 employees and operated over 1,000 childcare centres in its Australian operations. It also operated overseas, in countries such as the USA, the UK and New Zealand. 2 On 6 November 2008, Messrs Walker and Maloney were appointed voluntary administrators of the ABC Learning Group. On the same day, receivers and managers were appointed to the Group. On 2 June 2010, the creditors of the Group resolved that each of the companies in the Group be wound up voluntarily. 3 On 5 September 2011, the Liquidators commenced proceedings in the Court seeking to extend the period within which application could be made under s 588FF(1) of the Corporations Act 2001 (Cth) (the Act). On 2 April 2012, the Liquidators commenced further proceedings in the Court seeking to have all the companies in the ABC Learning Group wound up in insolvency pursuant to s 459A of the Act and the Liquidators appointed as joint liquidators of the Group. 4 The appellants comprise a syndicate of eight banks (the Banks) and their agent CBA Corporate Services (NSW) Pty Ltd (CBA). For convenience they will be referred to collectively as the Banks. 5 In broad terms, the appellants challenge the primary judge's decision to order the winding-up in insolvency of the Group companies on the following three bases: (a) the considerable weight which the primary judge attached to the possibility that the Liquidators might bring a claim under s 588FJ of the Act involved no more than "mere speculation" on his Honour's part; (b) the primary judge failed to take into account the fact that the liquidators had not proved that the ABC Learning Group was probably insolvent as at 6 November 2008 as was said to be required by analogy with the principle established by the NSW Court of Appeal in Syd. Mannix Pty Ltd v Leserv Constructions Pty Ltd [1971] 1 NSWLR 788 (Syd. Mannix). Instead, his Honour effectively reversed the onus by requiring the defendants in the Court below to prove the solvency of the Group; and (c) the primary judge failed to take into account the Liquidators' alleged failure to explain their delay in applying under s 459P of the Act for the Group be wound up in insolvency.

Relevant statutory provisions and legislative history 6 The relevant statutory provisions applying to the appeal may be summarised as follows. 7 Section 459A of the Act provides that, on an application under s 459P the Court may order that an insolvent company be wound up in insolvency. It is common ground that this is a discretionary power. It is also evident that the Act does not contain explicit criteria which control the exercise of that discretion. 8 Section 459P sets out who may apply for an order under s 459A. Such persons include a liquidator or provisional liquidator of the relevant company (s 459P(1)(e)). 9 The Court's power to wind up the company in insolvency under s 459A, even if the company is already being wound up voluntarily, is confirmed by s 467B. 10 Division 1A of Part 5.6 contains provisions specifying when different kinds of winding up are taken to have commenced. Section 513A specifies the time at which a winding up is taken to have begun where the Court makes an order under s 459A. The relevant parts of that provision are as follows: 513A Winding up ordered by the Court If the Court orders under… section 459A… that a company be wound up, the winding up is taken to have begun or commenced: (a) if, when the order was made, a winding up of the company was already in progress - when the last-mentioned winding up is taken because of this Division to have begun or commenced; or (b) if, immediately before the order was made, the company was under administration - on the section 513C day in relation to the administration; or (c)-(d) …; or (e) otherwise - on the day when the order was made. 11 Section 513B specifies the time at which a voluntary winding up is taken to have commenced. The relevant aspects of the provision are as follows: 513B Voluntary winding up Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced: (a) …; or (b) if, immediately before the resolution was passed, the company was under administration - on the section 513C day in relation to the administration; or (c)-(e) …. 12 The meaning of the "section 513C day" is given in s 513C, which is in the following terms: 513C Section 513C day in relation to an administration under Part 5.3A The section 513C day in relation to the administration of a company is: (a) if, when the administration began, a winding up of the company was in progress - the day on which the winding up is taken because of this Division to have begun; or (b) otherwise - the day on which the administration began. 13 Because the voluntary winding up of the ABC Learning Group did not commence until after the Group went into administration, s 513C(b) applies. The consequence is that the s 513C day is 6 November 2008, being the day on which the administration began. 14 It is common ground that 6 November 2008 is also the "relation-back day". That expression is defined in s 9 of the Act, which relevantly is in the following terms: relation-back day, in relation to a winding up of a company… means: (a) if, because of Division 1A of Part 5.6, the winding up is taken to have begun on the day when an order that the company or body be wound up was made - the day on which the application for the order was filed; or (b) otherwise - the day on which the winding up is taken because of Division 1A of Part 5.6 to have begun. 15 A relation-back day of 6 November 2008 is arrived at here by the combined operation of ss 9(b) and 513A(b) of the Act. The result is that 6 November 2008 is both the s 513C day and the relation-back day. 16 The significance of the relation-back day relates to the fact that various provisions in the Act operate inter alia to invalidate certain transactions entered into during the pre-liquidation period which is determined by reference to the relation-back day. The relation-back day is also relevant to other matters under the Act, including the making of presumptions in recovery proceedings (s 588E(3)(b)) and the personal liability of a person managing a company for the company's debts and liabilities (see s 588Z). 17 Part 5.7B of the Act deals with the recovery of property or compensation for the benefit of creditors of an insolvent company. Section 588FE declares certain transactions of a company being wound up to be voidable. They include a transaction which is an "insolvent transaction of a company" (as defined in s 588FC) which was entered into during the six months ending either on the relation-back day or after that day, but on or before the day when the winding up began. Section 588FF(1) provides that where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of s 588FE, the court can make various orders. 18 Section 588FG provides various defences which operate to prevent a court from making an order under s 588FF in respect of certain persons notwithstanding that the transaction is a voidable transaction. 19 Section 588FJ is an important provision in the appeal. It deals with transactions which are void vis-a-vis a liquidator. Adopting certain amendments which became effective on 30 January 2012 (see further at [31] below), it is relevantly in the following terms: 588FJ Circulating security interest created within 6 months before relation-back day (1) This section applies if: (a) a company is being wound up in insolvency; (b) the company created a circulating security interest in property of the company at a particular time that is at or after 23 June 1993 and: (i) during the 6 months ending on the relation-back day; or (ii) after that day but on or before the day when the winding up began. (2) The circulating security interest is void, as against the company's liquidator, except so far as it secures: [various things specified in (a) to (e)] (3) Subsection (2) does not apply if it is proved that the company was solvent immediately after that time. (4)-(5) … (6) If, during the 6 months ending on the relation-back day, or after that day but on or before the day when the winding up began, a debt secured by the circulating security interest was discharged, out of the company's money or property, to the extent of a particular amount (in this subsection called the realised amount ), the liquidator may, by proceedings in a court of competent jurisdiction, recover from the secured party, as a debt due to the company, the amount worked out in accordance with the formula: Unsecured amount - Realisation costs where: realisation costs means… unsecured amount means… 20 As the primary judge found at [16], if the orders sought by the Liquidators under s 459A had been made, the effect of s 588FJ(2) would have been to make void against the Liquidators any floating charge (or, more accurately, circulating security interest) granted by companies in the ABC Learning Group within the six month period ending on 6 November 2008 (the relation-back day), subject to certain exceptions (including the contingency that it is proved that the company which granted the charge was solvent immediately after it was granted, as provided for in sub-section 588FJ(3)). 21 The policy of s 588FJ has been described in one leading text (RP Austin and IM Ramsay, Ford's Principles of Corporations Law, Lexis Nexis Butterworths, 15th ed, 2013 at page 1698) as: … to protect other unsecured creditors against a form of preference of one unsecured creditor of an insolvent company over others where the circulating security interest is given to secure an existing indebtedness and the company derives no new benefit from the giving of the security interest.

Summary of factual background 22 The appellants did not challenge any of the primary judge's factual findings. Accordingly, the following brief summary of the relevant background facts draws largely on the judgment below (see [2]-[6] and [19]-[42] of his Honour's reasons for judgment). 23 Under a Syndicated Facility dated 10 December 2007 (the Facility Agreement), the Banks provided to the ABC Learning Group on an unsecured basis funding in the total amount of $1.43 billion. On 28 May 2008, the Banks' consent was sought to a proposed disposal of 60 percent of the parent company's USA interests for a total amount of approximately US$400 million (the US sale). On the following day, that consent was given by CBA as agent for the Banks on terms which required: (a) the delivery of payment directions for a total of US$385,230,000 to be paid directly to CBA; and (b) the Facility Agreement being amended to provide for a substantial reduction in the facility limit and the creation of charges over the ABC Learning Group. 24 The Facility Agreement was replaced by an Amendment and Restatement Deed on 25 June 2008 (the Restatement Deed). Subsequently, 16 companies in the ABC Learning Group executed a Deed of Charge which was registered with ASIC on 14 July 2008 (the Charge). The Charge operated as a fixed charge over certain parts of the charged property. On 25 June 2008 and following completion of the US Sale, a total of approximately US$409 million was remitted to CBA, of which US$310 million was repaid to the Banks, with the balance being transferred to the ABC Learning Group. 25 On 1 September 2008, ABC Learning Group sold its "UK Vouchers Business" for an amount of £95.16 million (the UK sale). Approximately £90.3 million was repaid to the Banks as required by various provisions in the Restatement Deed. On 27 October 2008, certain members of the ABC Learning Group granted additional charges to the Banks. 26 In the proceedings below, one of the liquidators (Mr Moloney) gave evidence concerning the insolvency of the companies in the ABC Learning Group at various times. He gave evidence that the companies were insolvent as at 2 June 2010 (i.e. the date the Liquidators were appointed after the creditors resolved that the companies in the Group be wound up voluntarily) and also as at 5 September 2011 (when the Liquidators made their first application for orders under s 459A of the Act). The Banks did not contest a finding of insolvency as at 5 September 2011 or as at any material time thereafter. 27 It is significant to note, however, that the Liquidators did not lead any evidence below dealing with the insolvency of the ABC Learning Group as at 6 November 2008 (being the relation-back day), because it was their position that insolvency as at that date was irrelevant to their applications to wind up in insolvency each member of the ABC Learning Group. 28 The primary judge also found that no view had yet been formed by the Liquidators as to whether the relevant transactions pursuant to which the Banks received moneys represented either: (a) voidable transactions under Part 5.7B of the Act; or (b) proceeds of assets the subject of a charge (or, more accurately, a circulating security interest) which might be void as against the Liquidators in the event that s 588FJ of the Act applied. 29 His Honour noted that Mr Moloney's evidence was to the effect that any proceedings which the Liquidators might eventually bring against the Banks would give rise to complex factual and legal issues and would be costly to run. Mr Moloney also gave evidence that the Liquidators did not have the necessary funds at the time of the proceedings below to commence and maintain proceedings against the Banks. However, he added that the Liquidators were then in discussions with a potential litigation funder to fund proceedings which the Liquidators might ultimately take against the Banks. That litigation funder had already funded various public examinations conducted by the Liquidators in relation to the Group, but Mr Moloney said that, at the time of the proceedings below, the potential litigation funder was not committed to funding any further action by the Liquidators. 30 The primary judge also noted Mr Moloney's evidence concerning the difficulties experienced by the Liquidators in obtaining access to books and records of the ABC Learning Group, partly because the receivers had taken possession of many of those documents. The documents only became available to the Liquidators during the course of the public examinations. Moreover, he said that the ABC Learning Group's books and records were voluminous, poorly kept and lacked "transparency".

Summary of primary judge's reasons 31 Before summarising his Honour's reasons for granting the Liquidators' application that each of the companies in the ABC Learning Group be wound up in insolvency, it is convenient to note that his Honour applied a version of the Act which did not reflect relevant amendments to the Act which became effective on 30 January 2012. Those amendments were introduced by items 95 to 101 in Part IV of Schedule 1 to the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) (the Amending Act). New concepts and definitions were introduced. For example, those amendments replaced all previous references to "floating charge on" with "circulating security interests"; "charge" was replaced with either "circulating security interest" or "security interest"; and "chargee" was replaced with "secured party". In item 10 of Part 1 of Schedule 1 to the Amending Act the new definitions of "circulating security interest", "security interest" and "security party" were inserted in the Act as ss 51C and 51B respectively. 32 Apparently the primary judge's attention was not drawn to the Amending Act. However, the changes relevant to this matter brought about by the Amending Act affected nomenclature, rather than substantive rights and obligations. Accordingly, no practical significance attaches to the oversight. 33 The primary judge's reasons for ordering that each of the members of the ABC Learning Group be wound up in insolvency pursuant to s 459A of the Act can be summarised as follows: (a) it was common ground between the parties that for such an order to be made, it was necessary for the applicant to show that the company was insolvent both at the date a winding up application was filed and also at the date of the hearing of the application (citing Finkelstein J's decision in Ann Street Mezzanine Pty Ltd (in liq) v Beck (2009) 175 FCR 532 at [9] (Ann Street)) ([48] and [65]); (b) where a company is already the subject of a creditors' voluntary winding up, the Court should not wind up the company in insolvency unless there is good reason for doing so (citing Carter v New Tel (2003) 44 ACSR 661 at [5] per Austin J (New Tel) and Commissioner of Taxation v Tull Reinforcing Pty Ltd (2006) 153 FCR 394 at [17] per Besanko J) ([49]); (c) it was significant that in New Tel an order was made under s 459A because Austin J was of the view that the making of such an order made it possible for the liquidator to have the benefit of s 588FJ in the sense that, on the evidence before Austin J, there seemed "to be a plausible case for such a challenge to be made, and the probability that if the challenge was successful, the unsecured creditors would receive a substantial benefit" ([50] and [51]); (d) his Honour was satisfied that each company within the ABC Learning Group was insolvent as at both the date of the hearing and when the Liquidators filed their applications for orders under s 459A ([66]); (e) although the relevant provisions of the Act did not expressly or impliedly require an applicant to establish the insolvency of a company as at the relation-back day where the company is already the subject of a voluntary winding up, his Honour acknowledged that the issue of solvency or insolvency at such time might be relevant in either of the following two situations (neither of which arose here): (i) where it was relevant to the merits of the proceedings to which s 588FJ is to be relied upon in the sense that a Court would not in its discretion make an order under s 459A if the only reason for doing so was to enable a liquidator to commence a proceeding under s 588FJ that was bound to fail ([68]); and (ii) where a potential defendant would be prejudiced by the making of such an order by reason of the loss or destruction of evidence ([69]); (f) the absence of evidence of insolvency as at the relation-back day was not a matter to which much weight should be attached in the present case. If it was shown the ABC Learning Group was solvent at or after the relation-back day, that might be very relevant to the exercise of discretion, but there was no evidence one way or the other on that matter. His Honour added: While it was open to the Liquidators to adduce evidence of insolvency as at the relation-back day, it was equally open to the Banks to adduce evidence of solvency as at that date. The Banks did not seek to adduce any evidence (of the Receivers or otherwise) directed to establishing that the ABC Learning Group was solvent as at the relation-back day ([71]); (g) the Banks' contention that, as a matter of discretion, the Liquidators should not be put in the position where they obtained the forensic advantages of s 588FJ without having established insolvency as at the relation-back day was rejected. That was because: "the adoption of such an approach is incompatible with the general nature of the discretion that must be exercised by the court in determining whether it is appropriate to order that a company already the subject of a voluntary winding up should be wound up in insolvency" ([72]); (h) while delay in making an application under s 459A is "plainly a relevant factor", this did not require a s 459A order not to be made here because: … it must not be assumed against the Liquidators that they were required to apply for an order under s 459A merely because they understood that the ABC Learning Group was insolvent. There is no reason in this case to make an order under s 459A except for the purpose of enabling the Liquidators to rely upon s 588FJ in proceedings which they might commence against the Banks. The Liquidators have not yet decided whether or not they will commence such proceedings. In any event, having taken the delay in applying for the s 459A order into account, I do not think that it is such as to justify me not making such an order (emphasis added) ([78]); (i) the Banks' argument that the Liquidators' delay caused them prejudice was a matter which was not given much weight because it was unsupported by the evidence and was "not particularly significant" in an overall assessment of the appropriateness of making an order under s 459A ([79-80]); and (j) considerable weight was given to the interests of the unsecured creditors in deciding whether or not to make a s 459A order. In this case, the making of such an order would enable the Liquidators, should they decide to do so, to commence proceedings against the Banks and, if that occurred and the proceedings proved successful, unsecured creditors were likely to reap the benefits. His Honour observed that he was dealing with circumstances where: … a very substantial corporate collapse has left the unsecured creditors, together owed many hundreds of millions of dollars, in a position where they have no prospects of receiving anything out of the winding up unless the Liquidators recover some substantial amount from the Banks ([81]).

Summary of appellants' case 34 As noted above, the appellants did not challenge any of the primary judge's background factual findings as outlined above. The appellants' primary arguments covering each of the three broad bases of challenge can be summarised as follows.

(a) No good reason for making a s 459A order There is a discretion under s 459A of the Act whether or not to make an order and the extent of that discretion has to be ascertained by reference to the scope and purpose of the provision and the Act more widely; in cases such as New Tel and Re Green (as liquidator of Australian Resources Ltd (in liq) (2004) 52 ACSC 452 (Re Green), it was held that there was a need for "good reasons" for making a s 459A order in circumstances where a company was already in voluntary liquidation. The primary judge erred in his approach by merely requiring the Liquidators to identify the theoretical possibility of making a claim under s 588FJ as satisfying the requirement that there be "good reason" for making the winding up in insolvency order. The Liquidators had not yet formed a view about the prospects of using s 588FJ and had not even formed a view about whether or not such a case should be brought. The absence of any good reason for making the order was said to be further demonstrated by the fact that there was no evidence to suggest that any of the companies in the ABC Learning Group was insolvent as at the relation-back day (which would be the day from which any such order would take operative effect); and the appellants clarified in their written reply submissions that their adoption of the use of the expression "good reason" simply reflected that the Court had to be satisfied that it was an appropriate case, having regard to the scope and purpose of s 459A, to make an order in circumstances where a company was already in liquidation.

(b) No finding of insolvency as at the relation-back day The primary judge erred in proceeding on the basis that it was not necessary for the Liquidators to establish insolvency of the companies in the ABC Learning Group as at 6 November 2008 (being the relation-back day), whereas by analogy with cases such as Syd. Mannix and Ann Street, such a finding was an essential and material consideration for the exercise of the discretion. Syd. Mannix is said to establish the reason why the applicant must prove insolvency as at the date of the application because that is the time when the winding up is taken to have commenced. The appellants say that the same should apply to the relation-back day, which is the day on which the winding up is taken to have commenced; the need to demonstrate insolvency as at the relation-back day reflects the "pivotal role" played by the relation-back day in the setting of particular time periods for the liquidator seeking remedies against third parties arising from a liquidation. The relation-back day is relevant for determining the period within which a voidable transaction of the kind set out in s 588FE of the Act might be caught in proceedings brought by a liquidator under s 588FF. The relation-back day is also relevant to the period within which a floating charge (or circulating security interest) might be void as against a liquidator. Under s 588FJ(2) the relation-back day assumes a particular significance in a case, such as the present, where a company is already in administration or voluntary liquidation when an application is made under s 459A. That is because, in such a case, both the date on which winding up is taken to have commenced and the relation-back day will coincide with the date on which the voluntary liquidation began (where there has been a voluntary liquidation only) or, if there has also been a period of administration, the date on which the administration began can be the critical date; the decisions in New Tel and Re Green are said to support the appellants' argument; the purpose of s 459A is achieved if the advantages of winding up in insolvency are afforded in circumstances where the applicant for such an order has shown that those advantages would also have been available had such an order been sought at the earlier time; and the primary judge's approach was wrong because his Honour effectively reversed the onus of proof in relation to the pivotal issue of insolvency by suggesting that the Banks, as a group identified by the Liquidators as potentially affected by a s 459A order, were required to show that the ABC Learning Group was solvent immediately after the floating charge was given, rather than requiring the Liquidators to demonstrate that the ABC Learning Group was insolvent as at the relation-back day.

(c) Unexplained delay Although the primary judge found that the Liquidators had delayed in making their application under s 459A, his Honour erred in not finding and taking into account the fact that the delay had not been explained by the Liquidators. 35 The appellants add that, if the Full Court was satisfied that the primary judge's exercise of discretion had miscarried, the Full Court should not remit the matter for reconsideration by the primary judge, but should exercise the discretion itself and dismiss the s 459P application.

Summary of respondents' case 36 The key points raised by the respondents may be summarised as follows.

(a) No good reason for making a s 459A order By insisting that an order cannot be made in the exercise of discretion under s 459A of the Act unless there is "good reason" for doing so, the appellants were effectively inviting the Court to prescribe additional requirements to those established by the Act and which were not part of the objects underlying the provision; the appellants incorrectly characterise the primary judge's reasoning as merely requiring the Liquidators to identify a theoretical possibility of making a claim under s 588FJ. The evidence contained "significant indicators" to suggest that the jurisdiction under that provision might be exercised to the benefit of creditors if the door was opened by making s 459A orders. That evidence included the material concerning the timing and fact of the creation of the floating charges in favour of the Banks and the evidence of the payments made to the Banks in respect of both the US sale and the UK sale. There was also evidence that the Liquidators were taking advice and considering whether or not to commence proceedings, which was sufficient because cases such as New Tel and Re Green required no more than the possibility of claims being brought; in determining whether the case was an appropriate one to make such an order, the primary judge was entitled to have regard to the fact that costly and time-consuming work was required to progress any further claims, including obtaining further legal advice and securing litigation funding. It made no sense to require the Liquidators to progress such matters and incur expenses before the outcome of any s 459A application was known because the creditors would bear the costs and delay arising from such activities; there is no warrant in the Act for imposing a specific requirement that there be a "good reason" for making a winding up in insolvency order. It is sufficient that the judge be persuaded to exercise the judicial discretion and make an order; and the legislative scheme reflects a balance of competing interests between different creditors and s 588FJ evinces a legislative intention that circulating security interests (including floating charges) should be treated differently and more harshly than other transactions, as is reflected in the fact that a creditor seeking to rely upon a circulating security interest does not have the benefit of the "defences" under s 588FG (which apply to voidable transactions in Part 5.7B of the Act).

(b) No finding of insolvency as at the relation-back day The appellants' argument that the Court had to be satisfied that a company was insolvent at the time of the relation-back day was unsupported by any authority and was bad in principle; the appellants overstate the effect of Syd. Mannix, which involved an earlier and different statutory context. The passage at 790 of Syd. Mannix relied upon by the appellants is, in any event, obiter. Further, the so-called "rule" in Syd. Mannix was the necessary consequence of rules of court which required a creditor to verify an application by adducing evidence of a company's inability to pay its debts when the relevant application is filed (citing Ann Street at [9]); acceptance of the appellants' argument would deprive applicants in the Liquidators' position of the presumptions of insolvency created by s 459C of the Act; cases such as New Tel and Re Green do not support the appellants' claims and, in any event, are not binding on this Court. In particular, in neither of those cases did the primary judges express any requirement that an applicant prove insolvency at the relation-back day; the appellants' argument does not take account of the fact that, if an application had been made at or around the time the winding up is taken to have commenced, the respondents would have had the advantage of presumed insolvency under s 459C(2)(c) of the Act; in circumstances where there was uncontested evidence of insolvency by at least 2011, and some indicators that the Group companies were insolvent from 2008, the Banks should have called evidence to suggest that the companies were not insolvent at any relevant time; the Banks' complaint that it is unfair to them to make a winding up order without evidence of insolvency at the relation-back day because of the advantages and other benefits under s 588FJ opened up to the Liquidators by the making of such an order, simply reflects the forensic advantages and benefits which the Parliament has determined ought to be available where companies are wound up in insolvency; and the Banks failed to show any error of a House v The King kind to justify interference with the primary judge's discretion.

(c) Unexplained delay The primary judge plainly did take into account the Liquidators' delay and determined that it was an insufficient reason for declining to make the orders sought, hence again no House v The King error is established. 37 The respondents also made submissions as to appropriate relief in the event that appellable error was established.

Consideration 38 It is convenient to deal with each of the three main bases of appeal in the same order as outlined above.

(a) No good reason for making a s 459A order 39 We consider that this aspect of the appeal should be rejected, substantially for the reasons advanced by the respondents. 40 First, the appellants' case relies heavily on the proposition that, consistently with the language used in cases such as New Tel and Re Green, a winding up in insolvency order should only be made "for good reason". Although they deny it, the appellants effectively advance a construction of s 459A of the Act which inserts that phrase into the body of the text of the provision. 41 In our view that is an erroneous approach. It is well established that the correct approach in determining the scope of a statutory discretion which is unconfined by express statutory criteria is to ascertain the factors that may be taken into account by reference to the subject matter, scope and purpose of the statutory provision (see, for example, Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J and Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 40 per Mason J). 42 While on one view it could reasonably be said that the phrase "for good reason" simply reflects a requirement that the power to order a winding up in insolvency should only be made in an appropriate case, there is a danger that that phrase could displace or distort the otherwise broad discretion conferred by s 459A. As the Full Court stated recently in Hua Wang Bank Berhad v Commissioner of Taxation [2013] FCAFC 28 at [13] the substitution of other words for the terms of a statutory discretion is to be discouraged as it is likely to lead to error. That danger is manifest here where the appellants seek to impugn the primary judge's decision by reference to the fact that the particular matters which were accepted as "good reasons" in cases like New Tel and Re Green are not present here. Whether or not the discretion under s 459A should be exercised in any particular case necessarily turns on an assessment all the relevant circumstances. In our opinion, the broad discretion under that provision should not be inhibited by artificially introducing a requirement of "for good reason" as though that is part of the provision itself. 43 The primary judge was very conscious of the fact that the ABC Learning Group was already the subject of a voluntary winding up. It was for that reason that his Honour accepted that an order would only be made under s 459A if there was a proper basis or good reason for doing so. As will emerge further below in [47]-[53], we consider that in explaining why he found that this was an appropriate case in which to make a s 459A order, the primary judge did not commit any appellable error bearing in mind that his decision was one arrived at in the exercise of a discretionary power. 44 Secondly, the appellants' approach, which effectively rewrites s 459A as though it contains an explicit requirement that there be good reasons before an order is made under the provision, tends to obscure the proper role of the Court in an appeal against a decision of a primary judge made in the exercise of the discretionary power under s 459A. The relevant question in such an appeal is not whether the primary judge erred in exercising his discretion because he did not have good reasons for making the relevant order, but rather whether the appellant has demonstrated appellable error in the sense described in House v The King (1936) 55 CLR 499. The relevant passage from the joint judgment of Dixon, Evatt and McTiernan JJ at 504-505 is well known, but deserves repeating: It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 45 We also respectfully agree with the following observations of Campbell JA in Durham v Durham (2011) 80 NSWLR 335 at [73] regarding the significance of that passage from House v The King: While the passage… from House v The King has been cited in Australian appellate courts repeatedly in the last 85 years it is the thoughts that it conveys about the permissible scope for appellate review of discretionary decisions, rather than the precise words itself (sic), that are important. What a ground of appeal against a discretionary decision must identify in the decision appealed against is an error that, in substance, falls within the test laid down in House v The King. 46 We consider that there would be a significant dilution in the restraining effect on an appellate court of the House v The King principles if the starting point for an appeal from a decision made in exercise of the discretion conferred by s 459A primarily focused on the question whether or not there were "good reasons" for making or not making such an order, as opposed to applying those principles in the context of a decision which involves a broad discretionary power, the confines of which are to be found in the subject matter, scope and purpose of the legislation.

No House v The King error 47 For the following reasons, we do not consider that the appellants have established any error in the House v The King sense concerning this aspect of the primary judge's decision. 48 First, we do not accept the appellants' contention that the primary judge took the view that it was sufficient if the Liquidators identified a "theoretical possibility" of a claim being made under s 588FJ in order for a winding up in insolvency order to be made. As the primary judge emphasised in [81] of his reasons for judgment, he gave "considerable weight" to the interests of the unsecured creditors in deciding to make an order under s 459A. In circumstances where the Liquidators had sought an order under s 459A because it would enable them to bring proceedings under s 588FJ should they decide to do so, the primary judge gave considerable weight to the benefit to unsecured creditors if any such proceeding proved successful. As the respondents point out, while the Liquidators are yet to decide whether to initiate such proceedings, there was material before the primary judge indicating that such proceedings were at least a distinct or rational possibility. The Liquidators were taking legal advice on whether or not to commence such proceedings and were also in discussions with potential litigation funders. 49 Secondly, in our view s 459A does not impose a standard of probability or certainty of proceedings being brought by a Liquidator under s 588FJ before an order can lawfully be made under that provision. Each case will necessarily turn on its own facts, but having regard to the relevant circumstances here, including the size and complexity of the ABC Learning Group collapse, coupled with the difficulties of accessing relevant corporate records, we see no appellable error in proceeding as the primary judge did. As his Honour correctly pointed out, it is not easy to understand why a liquidator should be compelled to extend considerable money and resources establishing the prospects of a possible s 588FJ claim unless and until the liquidator knows whether the door has been opened to the possibility of bringing such an action by the Court making an order under s 459A. 50 Thirdly, we do not consider that the primary judge's approach was inconsistent with the approach taken in cases such as New Tel and Re Green. We accept the respondents' submission that those cases do not stand for the proposition that something more than the possibility of proceedings being commenced under s 588FJ is required for an order to be paid under s 459A. 51 Dealing with New Tel first, that case involved an application by liquidators for an order under s 459A of the Act that New Tel be wound up in insolvency. New Tel's creditors had previously resolved that the company be wound up voluntarily under s 446A(2). One of the grounds relied upon by the liquidators in applying to have the company wound up in insolvency was related to their desire to attack the validity of two separate fixed and floating charges granted by New Tel. The first charge, created on about 7 November 2002, was in favour of both Optus Mobile Pty Limited and RSL Com Mobile Pty Limited and was said to secure an existing indebtedness of New Tel in the amount of approximately $11 million. The second charge had been granted to RSL Com Partners Ltd on about 4 November 2002. It purported to secure various debts and monetary liabilities. Significantly, Austin J noted at [9] that the evidence before him relating to the second charge was to the effect that the charge "may secure only "new advances" and therefore may fall outside s 588FJ, although Mr Hall [the liquidator] has not yet formed a concluded view on this point" (emphasis added). This uncertainty concerning the second charge was not viewed as significant. Austin J expressly acknowledged that, by making an order under s 459A, he would make it possible for the liquidator to attack the validity of both charges under s 588FJ. His Honour then added at [15]: On the evidence before me, there seemed to me to be a plausible case for such a challenge to be made, and a probability that if the challenge was successful, the unsecured creditors would receive a substantial benefit. 52 Justice Austin was satisfied that there was a "plausible case" in respect of the foreshadowed challenge to both charges, even though there was a possibility that the second charge might fall outside s 588FJ and in circumstances where the liquidator was yet to form a concluded view on that issue. In our view, there is no inconsistency between that approach and that taken by the primary judge here. 53 Likewise, we see no inconsistency between the primary judge's approach here and that taken by Barrett J in Re Green. In that case, after noting that "by and large" there is little practical difference between a creditor's voluntary winding up and a court-ordered winding up in insolvency, Barrett J was satisfied that there was a sufficient basis for making an order under s 459A in circumstances where the liquidator considered that there may have been insolvent trading and, if that were established, the liquidator could obtain recoveries against the directors for the potential benefit of the general body of creditors. His Honour made clear at [8] that he was not required to come to a definitive view on the proper construction of the terms of the insurance contract. He considered that it was sufficient that the prospects of making good that construction would be "substantially enhanced" if the liquidator pursuing those claims was a court-appointed liquidator, rather than a liquidator under a creditors' voluntary winding up. We do not view that decision as creating a standard higher than the need for there to be a rational possibility that s 588FJ proceedings might be commenced and might result in potential benefits for the general body of creditors.

(b) No finding of insolvency as at the relation-back day 54 We consider that the appellants' challenge in respect of this aspect of the matter should also be rejected for the following reasons, which we will briefly state before elaborating upon each of them: (i) Syd. Mannix is distinguishable and reflects an earlier and different statutory regime; (ii) importantly, there is no warrant in the current statutory regime or its legislative history for imposing a requirement that, for an order to be made under s 459A, insolvency has to be established as at the relation-back day; and (iii) other cases relied upon by the appellants such as Ann Street, New Tel and Re Green do not support the appellants' arguments on this issue. 55 We shall now deal with each of those three matters in turn. (i) Syd. Mannix is distinguishable 56 Syd. Mannix arose against the background of winding up provisions in the Companies Act 1961 (NSW) (the Companies Act). Syd. Mannix entered into a joint venture with another company for the purchase and sale of land. After the land was resumed, Syd. Mannix sought to recover a sum of money which it had advanced to its joint venturer. It filed a notice under s 222(2)(a) of the Companies Act (which was a form of statutory demand). Before the notice had expired, Syd. Mannix petitioned for the winding up of the other company and such an order was made. A statement of affairs made after the winding up order showed that the company had no assets and liabilities of $15,426. The company which had been wound up appealed arguing that the winding up order had been erroneously made because it had not been established that, at the date of the petition, the company was unable to pay its debts. It also sought to rely on fresh evidence. It is important to note that the case did not raise any issues concerning the existence or relevance of a floating charge. 57 In dismissing the appeal, Jacobs JA (with whom Holmes and Moffitt JJA agreed), made the following observations at pages 789-790, upon which the appellants place great reliance: Of course, the question which the company was entitled to have litigated and in respect of which it was entitled to appeal was whether or not at the date of the presentation of the petition it was unable to pay its debts. It has been submitted to us that the inability to pay debts need only exist at the time of the making of the winding-up order, or, as the matter is now under appeal and if fresh evidence were allowed, at the time of the hearing of this appeal. For this submission reliance is placed upon a passage in Mann v Goldstein, where Ungoed-Thomas J in a different context of fact did say that the insolvency requirements is only a prerequisite of the order and not a prerequisite of the presentation of the petition. He follows this, however, with the following sentence: "So if a person is entitled to present a petition, then the company's inability to pay its debts is the very matter which it is appropriate for the companies court to enquire into and decide in the exercise of its jurisdiction to make a winding-up order." It seems to me that the learned judge was directing primary attention to the need to be satisfied that the company is insolvent before a winding-up order is made. I do not think that he was directing particular attention to there being no requirement of a ground for winding up at the time of presentation of the petition. If he did mean that, then respectfully I would disagree with him. It seems to me that, particularly when the winding up commences from the presentation of the petition, if a winding-up order be subsequently made, it is necessary that a ground for winding-up under s. 222 be in existence at the time of the presentation of the petition. (Emphasis added, footnotes omitted). 58 The appellants argue that, by analogy, a similar requirement should apply under the current statutory regime in respect of the equivalent period in time when a winding up order commences which, in the circumstances of this case, is 6 November 2008 (being the relation-back day). 59 We consider that there are several reasons why that argument should not be accepted. They are as follows. First, as is evident from the emphasised words in the passage set out above, Jacobs JA's observations were plainly directed to the statutory regime then existing under the Companies Act. Those provisions included ss 222 and 223 which dealt respectively with the circumstances in which a company may be wound up by a court and the commencement of a winding up order made by a court. Relevantly, s 222(1) was in the following terms: 222. (1) The Court may order the winding up if - (a) the company has by special resolution resolved that it would be wound up by the Court; (b)-(d) … ; (e) the company is unable to pay its debts; (f)-(h) … 60 Sub-section 222(2) then specified various circumstances in which a company was deemed to be unable to pay its debts, which included a failure to satisfy a form of statutory demand. 61 Section 223 provided: 223. (1) Where before the presentation of the petition a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and, unless the Court on proof of fraud or mistake thinks fit otherwise to direct, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken. (2) In any other case the winding up shall be deemed to have commenced at the time of the presentation of the petition for the winding up. 62 Jacobs JA clearly had s 223(2) in mind when he made reference in the relevant passage to the winding up commencing from the date of the presentation of the petition for winding up. Section 223 was expressed in relatively simple terms. It specified the commencement date for a court-ordered winding up by reference to only two sets of circumstances. The first was where a company was already in the process of being wound up voluntarily at the time when a petition was presented seeking to have a court wind up the company. The second category of circumstances encompassed all other cases and stipulated that the winding up was deemed to have commenced when the petition was presented. 63 That is to be contrasted with s 513A of the current Act (the relevant terms of which are set out in [10] above), which specifies when a winding up is taken to have begun or commenced where a winding up is ordered by the Court under inter alia s 459A. As is evident on its face, s 513A is a more comprehensive and complex provision dealing with the commencement of court-ordered windings up. For example, it operates in part by reference to the "s 513C day", a novel concept which had no counterpart in the Companies Act. Furthermore, it is to be noted that s 513A covers five different sets of circumstances involving a Court ordered winding up, including s 513A(b) which applies here (i.e. where a company was under administration immediately before the winding up order is made, in which case the winding up is taken to have begun or commenced on the s 513C day). The contrast between the terms of s 223 of the Companies Act and s 513A of the current Act highlights the dangers of transposing judicial observations concerning the former provision into a significantly different statutory context. 64 Secondly, that danger is further highlighted when regard is had to other relevant differences between the Companies Act as in force at the time Syd. Mannix was decided and relevant provisions of the current Act. Significantly, the Companies Act did not utilise the doctrine of "relation-back". Indeed, the concept of a "relation-back day" was first introduced in companies legislation by the Corporate Law Reform Act 1992 (Cth), which amended the Corporations Law. Prior to that time, the concept of "relation-back" was confined to bankruptcy. Under the Bankruptcy Act 1924 (Cth) the bankruptcy of a debtor would have "relation-back to" the time of the act of bankruptcy upon which a sequestration order was made. If there was more than one act of bankruptcy, the bankruptcy would have "relation-back to", and commence from, the time of the first of those acts of bankruptcy within the period of six months preceding the date of the presentation of the bankruptcy petition (see s 90 of the Bankruptcy Act 1924). The concept of relation-back was also adopted in s 115 of the Bankruptcy Act 1966 (Cth). 65 The role of relation-back in bankruptcy was explained by the Australian Law Reform Commission in its 1988 report entitled General Insolvency Inquiry at [696] (the Harmer Report): 696. What is 'relation-back'? The term 'relation-back' is peculiar to bankruptcy. It is the term given to a statutory provision that deems the bankruptcy to have commenced at an earlier point in time that it actually did: the deemed date is the date of the earliest act of bankruptcy committed by the insolvent in the period of six months immediately preceding the actual commencement of the bankruptcy. In the past the concept has been considered significant in relation to property of a bankrupt because by the application of the concept, in its most absolute sense, all dispositions of property by the bankrupt from the time the relation-back period commences are avoided and the property disposed of is, at least in theory, divisible among the creditors of the bankrupt. As will emerge further below, the Commissioner recommended that the doctrine of relation-back be abolished, but that recommendation was not adopted. Instead, as noted above, the concept of a "relation-back day" was inserted into the Corporations Law by the Corporate Law Reform Act 1992 (Cth). 66 When Syd. Mannix was decided, there were, of course, provisions in the Companies Act dealing with undue preferences and the effect of certain floating charges (see ss 293 and 294 respectively). Those provisions did not contain any express reference to the concept of "relation-back". Nor did the Companies Act contain provisions such as ss 567 and 588FJ of the current Act, which confer recovery rights on a liquidator in respect of certain transactions entered into within a specified period leading up to the relation-back day. 67 Section 293 of the Companies Act relevantly provided as follows: 293. (1) Any conveyance, transfer, charge, delivery of goods, payment, execution or other act relating to property made or done by or against a company which, had it been made or done by or against an individual, would in his bankruptcy be void or voidable shall in the event of the company being wound up be void or voidable in like manner. (2) For the purposes of this section, the date that corresponds with the date of presentation of the petition in any proceedings in bankruptcy in the case of an individual shall be - (a) in the case of a winding up by the Court - (i) where before the presentation of the petition for the winding up a resolution has been passed by the company for winding up the company voluntarily, the date upon which the resolution to wind up the company voluntarily is passed; or (ii) where on the presentation of the petition for the winding up the company is under official management or has been under official management at any time within six months prior to the presentation of the petition, the date of the commencement of the official management; or (iii) the date of the presentation of the petition for the winding up, whichever is the earliest; and (a) in the case of a voluntary winding up - (i) the date upon which the resolution to wind up the company voluntarily is passed; or (ii) where on the date of the passing of that resolution the company is under official management or has been under official management at any time within six months prior to the passing of that resolution, the date of the commencement of the official management, whichever is the earlier. (3) Any transfer or assignment by the company of all its property to trustees for the benefit of all its creditors shall be void. 68 And at the time Syd. Mannix was decided, s 294 of the Companies Act was in the following terms: 294. A floating charge on the undertaking or property of the company created within six months of the commencement of the winding up shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid except to the amount of any cash paid to the company at the time of or subsequently to the creation of and in consideration for the charge together with interest on that amount at the rate of five per centum per annum. 69 It is notable that the current Act contains far more extensive provisions dealing with the effect of a winding up on certain transactions and a liquidator's recovery rights for the benefits of creditors of an insolvent company. The relevant provisions are set out in Division 7 of Part 5.6 and Part 5.7B of the Act. They deal with such matters as undue preference (s 565); the effect of a circulating security interest entered into within six months before the relation-back day (s 566); a liquidator's recovery right in respect of certain transactions entered into within four years before the relation-back day (s 567); presumptions in recovery proceedings (s 588E); voidable transactions (Division 2 of Part 5.7B) and a liquidator's recovery rights in respect of both voidable transactions (s 588FF) and certain circulating security interests entered into within six months before the relation-back day (s 588FJ). 70 The relevant previsions in the current Act substantially reflect the Parliament's adoption of most of the recommendations in the Harmer Report. In many respects those provisions reflect a significant rebalancing by the Parliament of the competing interests affected by a winding up compared with the balance which was struck in the Companies Act. 71 In our view, the differences between the relevant provisions of the Companies Act in force at the time of Syd. Mannix and those in the current Act are both extensive and significant, not the least in respect of the introduction of the concept of a "relation-back day". We consider that the appellants' argument that the passage from Jacobs JA's judgment in Syd. Mannix extends beyond its immediate statutory and factual context should be rejected. We see no warrant for construing s 459A of the Act as requiring the primary judge to be satisfied that the affected companies were insolvent as at the relation-back day. 72 That is not to say, however, that the solvency or insolvency of a company may not be a relevant consideration in certain circumstances in considering whether or not to make an order under s 459A. We respectfully agree with the primary judge that such considerations may be relevant where: (a) the issue of solvency bears upon the merits of foreshadowed proceedings under s 588FJ(3). His Honour gave an example of a person who had taken a floating charge from a company that was the subject of a voluntary winding up demonstrating that the company was solvent immediately after the charge was given, in which case there would be no good reason for ordering the company to be wound up in insolvency if the only reason for doing so was to enable a liquidator to initiate a proceeding under s 588FJ that was bound to fail; or (b) there is prejudice to a potential defendant by reason of the loss or destruction of relevant evidence, as described by the primary judge at [69] of his reasons for judgement. 73 We consider that no appellable error has been established in respect of the primary judge's findings at [71] of his reasons for judgment. In the light of our rejection of the appellants' construction of s 459A as requiring insolvency to be established as at the relation-back day, no valid objection can be taken to his Honour's conclusion that he did not attach "much weight" to the absence of such evidence from the Liquidators. Nor do we accept the appellants' related submission that the primary judge effectively reversed the onus by pointing out in that same paragraph that the Banks could have adduced evidence of solvency as at that date, but failed to do so. In our view, those findings and remarks simply reflect his Honour's reasoning, with which we respectfully agree, that it was a matter for the Banks to determine whether or not any such evidence should be adduced by them. If such evidence had been adduced it can be assumed that the primary judge would have taken it into account as it would have been relevant to the first of the two matters set out in [72] above of these reasons. 74 For completeness, it should also be noted that an appeal to the High Court in Syd. Mannix was dismissed in circumstances where the High Court found it unnecessary to determine the correctness of the proposition that a petitioner had to establish that the relevant company was unable to pay its debts as at the date of the presentation of the petition. 75 The High Court's decision is briefly noted under the name Leserv Construction Pty Ltd (In liq) v Syd. Mannix Pty Ltd [1972] 46 ALJR 548. The parties were unable to obtain a copy of the High Court's reasons for judgment. Subsequent to the hearing, a copy was obtained by the Court from the archives. The parties accepted the Court's invitation and made brief supplementary written submissions on the High Court's reasons. 76 Barwick CJ gave the leading judgment, delivering brief oral reasons for dismissing the appeal (which were agreed by McTiernan, Menzies, Gibbs and Stephen JJ). The entirety of those oral reasons is as follows: On the assumption that it rested on the petitioner in this matter to establish that at the date of the presentation of the petition the appellant company was unable to pay its debts, a matter which I find it unnecessary presently to decide, I am of opinion that without the benefit of the statutory presumption created by s.222(2) of the Companies Act 1961 of New South Wales, but including the fact of the giving of the notice dated 23 November 1970 and the appellant's failure to respond to it, the primary judge, in my opinion, had evidence before him and the Court of Appeal had ample evidence before it to warrant the conclusion that the company was unable to pay its debts at the date of the presentation of the petition and at the date of the order for the liquidation of the company. For those reasons I would dismiss the appeal (emphasis added). 77 Self-evidently, there is nothing in the High Court's reasons which supports the appellants' reliance on the passage from Jacob JA's judgment in the Court of Appeal as supporting its contention that, for the purposes of s 459A of the Act, insolvency has to be established at the relation-back day.

(ii) Appellants' construction not supported by relevant provisions of the Act or its legislative history 78 In our analysis of Syd. Mannix above we have emphasised the importance of the differently-worded provisions in the Companies Act which provided the context for the observations made by Jacobs JA. It is appropriate if we say a little more about the significance of both the text of the relevant provisions of the current Act and the lack of support for the appellants' argument in relevant extrinsic materials. In approaching these matters we are particularly mindful of the High Court's recent statements in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 at [39] (per French CJ, Hayne, Crennan, Bell and Gageler JJ) concerning the task of statutory construction: "This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself. (Footnotes omitted). 79 First, as we have already emphasised, the text of s 459A makes no reference to a need to establish insolvency as at the relation-back day, nor do we consider that any such general requirement arises having regard to the subject matter, scope and purpose of the legislation. Section 459A confers a broad discretion. While there may be some circumstances in which it might be relevant to consider whether a company was insolvent at the relation-back day (such as the two examples described in [72] above), there is nothing in the Act which supports the appellants' contention that there is either a general requirement or, alternatively, a specific requirement to that effect in the particular circumstances of this case. 80 Secondly, as we have also emphasised above, there are significant differences between the relevant provisions of the Companies Act as in force when Syd. Mannix was decided and those contained in the current Act. Having regard to the nature and extent of those changes, we see no warrant for extending the so-called rule described by Jacobs JA so as to imply in s 459A either a general or specific requirement of establishing insolvency as at the relation-day as contended for by the appellants. 81 Thirdly, the danger of taking Jacob JA's observations out of their immediate statutory and factual context and applying them to a later and differently-worded statutory context (as well as a different factual context) is further highlighted by the difficulty of reconciling the appellants' position with the presumptions created under s 459C of the current Act. Section 459C is relevantly in the following terms: 459C Presumptions to be made in certain proceedings (1) This section has effect for the purposes of (a) an application under section… 459P…; or (b) an application for leave to make an application under section 459P. (2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made: (a) …; or (b) …; or (c) a receiver, or receiver and manager, of the property of the company was appointed under a power contained in an instrument relating to a circulating security interest in such property; or (d)-(f) …. (3) A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application. 82 The respondents contend that acceptance of the appellants' construction of s 459A would deprive applicants in the Liquidators' position of the presumptions of insolvency in that provision, which is unlikely to have been intended. To illustrate the point they advance the hypothetical circumstance of the Liquidators having applied on 6 November 2008 to have the Group companies wound up in insolvency, in which case they would have been entitled to the presumption of insolvency under s 459C(2)(c) arising from the appointment on that day of receivers and managers. That presumption would, of course, be subject to rebuttal by evidence establishing the companies' solvency as provided for in s 459C(3). But the essential point remains, namely that it is difficult to reconcile the fact that the Parliament intended that an applicant under s 459P have the benefit of a presumption of insolvency in the stipulated circumstance, yet the appellants' case insists that such an applicant would have to establish insolvency. 83 The difficulty of accepting the appellants' contention that insolvency has to be established as at the relation-back day in considering whether or not to make an order under s 459A is further highlighted by s 436A of the Act. It provides that a company may appoint an administrator if a resolution is passed by the board to the effect that, in the opinion of the directors voting for the resolution, the company is insolvent or is likely to become insolvent at some future time. It is to be noted that that power turns on the opinion of the directors as to the company's insolvency and also operates by reference to an opinion that the company is either insolvent or is likely to become insolvent. As noted above, the timing of the appointment of an administrator of a company which is then wound up in insolvency may determine the relation-day. The difficulty this presents for the appellants' argument is that they contend that insolvency has to be established as at the relation-back day, which sits uncomfortably with the less onerous requirements imposed by s 436A. 84 Finally, we note that none of the parties placed particular reliance upon any aspect of the Harmer Report or other extrinsic legislative materials as lending particular weight one way or the other regarding the appellants' construction of s 459A.

(iii) The relevance of cases such as Ann Street, New Tel and Re Green 85 The appellants contend that their core contention to the effect that insolvency had to be established at the relation-back day is supported not only by Syd. Mannix, but also by several subsequent first instance decisions. Those decisions include Ann Street, New Tel and Re Green. In our view, none of those cases supports the appellants' construction of s 459A of the Act. 86 In Ann Street, at [9] Finkelstein J approved and applied both Syd. Mannix and Dallhold Investments Pty Ltd (in liq) v Gold Resources Australia Ltd (provs liq apptd) (1991) 31 FCR 587 in concluding that a creditor is required to establish the insolvency of a company both at the time of filing an application for winding up (or under the old procedure in place at the time of Syd. Mannix, the presentation of the petition) and also at the hearing. At [9], Finkelstein J expressly noted Jacobs JA's explanation that the need to establish insolvency at the date of the presentation of a petition related to the fact that that was the time when the winding up commenced and described that explanation as "one reason for the rule". Significantly, however, Finkelstein J also saw the rule as emanating from an additional and separate source: namely, because it "is the necessary consequence of the requirement that the creditor is required to verify his application, that is, tender evidence of the company's inability to pay its debts, at the time the application is filed" (at [9]). The source of the verification requirement to which his Honour referred was (and remains) the Federal Court (Corporations) Rules 2000 (Cth) (and, in particular, rr 2.4 and 5.4). 87 We do not consider that Ann Street provides any support for the appellants' claim that, for the purposes of s 459A of the Act, insolvency has to be established at the relation-back day. That question did not arise in Ann Street and Finkelstein J's adoption and application of Syd. Mannix takes the matter no further having regard to our analysis of Syd. Mannix above. 88 The judgments of Austin J and Barrett J in New Tel and Re Green respectively were also at the forefront of this aspect of the appellants' case. It is appropriate to say a little more about each of those decisions. 89 We do not consider that the appellants' case is advanced by New Tel. That case involved an application under s 459P to convert a creditors' voluntary winding up into a winding up in insolvency. Administrators had been appointed on 10 December 2002 and the creditors had resolved on 13 February 2003 that the company be wound up. An application for an order that the company be wound up in insolvency under s 459A was made on 3 March 2003 and was granted on the same day. Justice Austin observed at [4] that there was ample evidence before him that the company had been insolvent for "some time". His Honour referred to the administrators' report to creditors dated 2 January 2003, which contained an interim conclusion that by 30 June 2002 the company was unable to pay its debts as and when they fell due. Austin J also made reference to a further report dated 13 January 2003 and to the liquidator's affidavit made on 18 February 2003, which included an estimate that there was a deficiency of assets to liabilities of $15 million. Austin J concluded at [4] that he was satisfied that the company was insolvent in the sense defined in the Act. 90 It may well be, as the appellants' contend, that Austin J satisfied himself on the evidence before him that the company was probably insolvent at the time the winding up took effect (i.e. 10 December 2002) as well as at the date of the hearing, but Austin J's reasons for judgment do not reveal any analysis of the relevant provisions which requires as a matter of law that insolvency has to be established as at the date the winding up is taken to have commenced under s 513A. 91 In our view, for the following reasons, Re Green does not take the matter any further. As the respondents point out, Re Green does not stand for the proposition that an order can only be made under s 459A if there is evidence of probable insolvency at the relation-back day. Rather, Barrett J referred at [3] to the liquidator's evidence as providing a sound and sufficient basis for concluding that each company was insolvent "at some point in 1999 and has remained in that position." In earlier proceedings before Barrett J involving the same parties (reported at (2002) 41 ACSR 69), the relation-back date was found to be 14 March 1999. It is evident that Barrett J did not find it necessary for the purposes of making an order under s 459A to insist that the liquidator establish that the relevant companies were both insolvent at the relation-back day . Instead, his Honour was content to proceed on the basis that there was evidence of such insolvency at "some point in 1999" and that such insolvency remained as at the date of the hearing.

(c) Unexplained delay 92 We also reject the appellants' complaint that the primary judge failed to take into account the fact that the Liquidators' delay in making an application for an order under s 459A of the Act was unexplained. In [78] of his reasons for judgment, the primary judge expressly stated that delay in making such an application was "plainly a relevant factor". It is true that his Honour did not explicitly articulate his acceptance of the Liquidators' explanation for the delay in this part of his judgment, but we do not consider that it was necessary for him to do so. The primary judge made express reference in [78] to the fact that the Liquidators had not yet decided whether they would initiate proceedings under s 588FJ. His Honour plainly had in mind his earlier findings concerning the difficulties which the Liquidators had experienced in forming a final view as to whether proceedings should be brought under s 588FJ, including the complexity of the factual and legal issues involved and the discussions taking place with potential litigation funders. The delay was also partly explicable by evidence of the Liquidators' difficulties in obtaining access to books and records of the ABC Learning Group, evidence which his Honour accepted at [35]. 93 As we understand it, none of those matters was in dispute. Accordingly, we do not consider that it was incumbent upon the primary judge to embark upon a detailed account of why he accepted the Liquidators' explanation for the delay.

Conclusion 94 For all these reasons, the appeal should be dismissed and the appellants ordered to pay the respondents' costs. I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Foster, Barker & Griffiths.

Associate: Dated: 12 July 2013 SCHEDULE 1 Company Name ACN/ABN Commonwealth Bank of Australia Limited 123 123 124 Westpac Banking Corporation 33 007 457 141 National Australia Bank Limited 12 004 044 937 Australia and New Zealand Banking Group Limited 11 005 357 522 Bank of America N.A. 51 064 874 531 Citibank N.A. 34 072 814 058 Mizuho Corporate Bank Ltd 83 099 031 106 Bank of Western Australia Limited 050 494 454

SCHEDULE 2 Company Name ABN/ACN Child Care Centres Australia Limited 100 250 646 Hutchinson's Child Care Services Limited 100 493 874 Kids Campus Limited 009 815 472 Peppercorn Management Group Limited 087 155 860 A.B.C. Canadian Holdings Pty Limited 126 839 941 A.B.C. Corporate Care Pty Limited 098 738 928 (now known as ZYX Corporate Care Pty Limited) A.B.C. Developmental Learning Centres Pty Limited 82 010 788 502 (now known as ZYX Developmental Learning Centres Pty Limited) A.B.C. Early Childhood Training College Pty Limited 68 069 159 566 (now known as ZYX Early Childhood Training College Pty Limited) A.B.C. Education Services Pty Limited 107 310 743 A.B.C. Employment Services Pty Limited 130 442 394 A.B.C. European Holdings No. 1 Pty Limited 122 710 123 A.B.C. European Holdings No. 2 Pty Limited 122 710 132 A.B.C. European Holdings No. 3 Pty Limited 128 132 829 A.B.C. Land Holdings Pty Limited 89 108 964 227 A.B.C. Learning Centres Finance Pty Limited 125 820 395 A.B.C. New Ideas Pty Limited 83 112 237 377 (now known as ZYX New Ideas Pty Limited) A.B.C. Queensland Pty Limited 129 029 769 A.B.C. USA Holdings Pty Limited 37 121 360 147 A.B.C. USA Property Holdings No. 1 Pty Limited 126 641 665 A.B.C. USA Property Holdings No. 2 Pty Limited 126 641 674 Childcare Development Solutions Pty Limited 107 241 181 ATF the Childcare Development Solutions Unit Trust DPPA Pty Limited 114 743 092 Flel Pty Limited 42 096 172 075 FutureOne Pty Limited 009 221 470 HCCS Operations Pty Limited 18 097 846 707 Kids Campus (W.A.) Pty Limited 45 112 150 099 Kids Campus Australia Pty Limited 13 104 407 187 Kids Campus Holdings Pty Limited 62 107 379 751 Klendo Pty Limited 098 366 968 Marshen Pty Limited 101 400 104 Peppercorn Holdings No. 1 Pty Limited 095 599 250 Peppercorn Holdings No. 2 Pty Limited 099 074 781 Peppercorn Holdings No. 3 Pty Limited 100 679 374 Peppercorn Holdings No. 4 Pty Limited 84 101 236 766 Peppercorn Holdings No. 5 Pty Limited 42 103 201 136 Peppercorn Holdings No. 6 Pty Limited 103 210 751 Premier Early Learning Centres Pty Limited 100 831 856 Select Child Care Management Pty Limited 093 925 056