HIS HONOUR: The plaintiffs Peter William Marsden and David John Kerr are the liquidators of the Patterson Group Pty Ltd pursuant to a deemed creditors' voluntary winding up which arose when on 25 March 2014 the company failed to execute a Deed of Company Arrangement in compliance with a creditors' resolution at a meeting which held on 3 March 2014 that it do so. The liquidators were at that time the voluntary administrators of the company pursuant to (Commonwealth) Corporations Act 2001, s 436A, having been appointed as such on 24 January 2014, which for relevant purposes is the s 513C day.
By originating process filed on 13 May 2014, the liquidators seek an order that the company be wound up by the Court on the just and equitable ground, or alternatively in insolvency, pursuant to Corporations Act, ss 461(1)(k) and 459P, and that they be appointed official liquidators.
The company was engaged in the delivery of commercial interior design and project management services. When it went into administration, its only material project was the fit-out of premises for the Australian Energy Market Commission ("AEMC"), which has filed a notice of appearance and intention to oppose the application and has been granted leave to appear on the hearing. For that purpose, the company entered into a minor works contract with AEMC in June 2013 and subsequently into an amendment and reinstatement deed on 23 August 2013. The contract provided for the company to make progress claims on the 25th day of each month, to be assessed and certified by AEMC as principal, and that within fourteen days after receipt of the claim, AEMC was required to procure payment by the landlord or itself pay the amount certified. AEMC was permitted to pay, out of any moneys payable to the company, any moneys owing by the company to a subcontractor, worker or consultant in relation to the execution of any of the work under the contract, such payment to be deemed to have been paid to the contractor under the contract.
In December 2013, the company made a payment claim for $277,214 and in January 2014 two further payment claims for $30,399 and $10,072 respectively. On 6 March 2014, AEMC served two payment schedules in which it identified that payments had been made to subcontractors totalling $246,165.
When the director of the company decided not to proceed with the Deed of Company Arrangement, the company on 20 March 2014 made a demand on AEMC for $246,165 on the basis that the payments would, upon commencement of a Court-ordered winding up, be void as dispositions of the company's property after the commencement of the winding up. AEMC disputes that contention and invokes the judgment of the Full Court of the Supreme Court of Western Australia in Gericevich Contracting Pty Ltd v Sabemo (WA) Pty Ltd (1984) 9 ACLR 452.
The liquidators bring the present application for the purposes of converting the deemed creditors' voluntary winding up into a Court-ordered winding up, in order to enable them to pursue the claim against AEMC for recovery of the amount demanded. That is because s 468 provides that a disposition of property after the commencement of a winding up by the Court is, unless the Court otherwise orders, void. There is no corresponding provision in connection with a creditors' voluntary winding up.
It is clear and not in dispute that the voluntary liquidators of a company have standing to apply to the Court for the winding up of the company by the Court [see s 459P in respect of a winding up in insolvency, and s 462 in respect of a winding up generally]. The Court's power to wind up a company in insolvency notwithstanding that it is already being wound up voluntarily is confirmed by s 467B [see, inter alia, In the matter of EvCorp Grains Pty Ltd (No 2) [2014] NSWSC 155].
In that case, after reviewing the authorities which had initially held that "good reason" was required for the Court to intervene in a voluntary winding up by making a winding up order, which was subsequently doubted by the Full Federal Court in CBA Corporate Services (NSW) Pty Limited v Walker and Moloney, in the matter of ZYX Learning Centres Limited (receivers and managers appointed) (in liq) [2013] FCAFC 74, I sought to summarise the position as follows (at [16] to [19]):
First, while an unpaid creditor who establishes insolvency is usually regarded as entitled to a winding up order almost as of course, that is not so where the company is already in liquidation. The existence of a voluntary liquidation is a relevant consideration so that where a voluntary liquidation is in place there needs to be some justification for replacing it with a compulsory liquidation.
Secondly, such justification will ordinarily be found, if at all, in the interests of the administration and in particular, the general body of creditors. Typically, the possibility that a Court appointed liquidator will be able to realise additional benefits for the creditors not available to a voluntary liquidator will provide such justification [Re Green (as liq of Australian Resources Ltd); Carter v New Tel; Deputy Commissioner of Taxation v Tull Reinforcing].
Thirdly, on the other hand, the mere preferences of the plaintiff - such as a mere desire to replace a liquidator - are insufficient. This is because it would otherwise afford a means of circumventing s 503. Thus, where the sole purpose of proceeding with a winding up application is to replace a voluntary liquidator with a Court appointed liquidator, the Court adopts the same approach as on an application under s 503 to remove a liquidator and appoint another... likewise, it is not sufficient justification that making a winding up order will meet the plaintiff's desire to recover its costs...
Finally, the views of the general body of creditors are also a relevant consideration. It would usually tell against a compulsory winding up if the majority of unrelated creditors supported continuation of a voluntary administration.
In that case, I declined to make a compulsory winding up order where the company was in voluntary liquidation because essentially it was sought only so that the plaintiffs' preferred liquidator would be substituted for the liquidator appointed on the unsuccessful completion of the voluntary administration.
In the present case, I accept for present purposes that AEMC may have a powerful defence to any claim that may be brought against it. Counsel for the liquidator has identified arguments for distinguishing the decision of the Western Australian Full Court in Sabemo, whereas counsel for AEMC submits that that it is relevantly indistinguishable. It may well be that AEMC would succeed at the final hearing of the foreshadowed application, and it may even be that AEMC could succeed on an application for summary dismissal should the proceedings be instituted against it. Of course, I make no finding or even prediction in that respect.
But it seems to me that, where the liquidators' purpose is to put themselves in a position where they will at least have the standing to bring such proceedings which necessarily, if successful, would be for the benefit of the general body of creditors as a whole, it is one stage too early to decline them the ability to gain that standing by refusing to convert the voluntary winding up into a Court ordered winding up. The potential that such an application might be brought is in my judgment sufficient reason in the general interests of the administration to grant the liquidators the relief they sought. Such an approach is consistent with that adopted by Barrett J, as his Honour then was, in Re Green (2004) 52 ACSR 452 where his Honour referred to "a rational possibility that proceedings might be commenced and might result in potential benefits for the general body of creditors", and took the view that he was not required to come to any definitive view on the proper construction of the terms of the contract then in question the subject of the foreshadowed recovery action.
The Court orders that:
1. The defendant be wound up pursuant to Corporations Act, s 461(1)(k).
2. Peter William Marsden and David John Kerr of the RSM Bird Cameron be appointed joint and several official liquidators of the defendant.
3. The plaintiff's costs of the application be costs in the liquidation.
[2]
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Decision last updated: 26 February 2015
Parties
Applicant/Plaintiff:
CBA Corporate Services (NSW) Pty Limited
Respondent/Defendant:
Walker and Moloney, in the matter of ZYX Learning Centres Limited