2010/242928 PINE FORESTS OF AUSTRALIA (CANBERRA) PTY LTD & 3 ORS
JUDGMENT
1 This is an application under s 482(1) of the Corporations Act 2001 (Cth) for an order terminating the court-ordered winding up of Pine Forests of Australia (Canberra) Pty Ltd which I shall call "PFC". Other orders are also sought.
2 The plaintiffs are PFC itself, Mr Hicks (its liquidator), Syfind (Finances) Pty Ltd ("Syfind") and Pine Forests of Australia Pty Ltd ("PFA"). Syfind and PFA between them hold all the shares in PFC and are the only contributories. They are also major creditors. In both those capacities, Syfind and PFA have standing under s 482(1A)(a) to apply for an order terminating the winding up, as does the liquidator.
3 Stated in very general terms, a central question on any application under s 482(1) is whether the company's financial health is such that it may safely be released from the form of external administration focussed mainly on the interests of creditors and returned to the mainstream of commercial life where it may, under the control of its directors, incur new debts that have to be paid as and when they fall due. A capacity to operate in a financially sound and responsible way and to service foreseen indebtedness is central to the inquiry.
4 The order sought with respect to termination of the winding up in this case, as set out in the originating process, is as follows:
"1. An order under section 482(1) of the Act that the winding up of Pine Forests of Australia (Canberra) Pty Ltd (in Liquidation) (ACN 002 042 015) ( Company ) be terminated upon, both, interest payable to creditors of the Company under section 563B of the Corporations Act 2001 (Cth) ( Act ) having been paid to creditors as specified in order 2 below, and upon a new director of the Company being elected as specified in order 3 below."
5 The reference in this form of order to "order 2 below" is a reference to the following:
"2. An order that Peter Charles Hicks, as liquidator of the Company pay interest to the following creditors of the Company and in the following amounts pursuant to section 563B of the Act:
(a) Australian Taxation Office - $13,2678.82
(b) Ms Sallyanne Bond - $2,152.80
(c) Dr Terence Mau - $5,025.60
(d) Mrs Genneice Gorey - $11,460.02"
6 The reference in order 1 to "order 3 below" is a reference to the following, as set out in the originating process:
"3. Directions under section 482(3) of the Act that Peter Charles Hicks convene, as soon as reasonably practicable, a general meeting of the members of the Company to elect a director of the company to take office upon the termination of the winding up and at which meeting the following resolutions will be considered and voted upon:
a. That Daria Read be removed as a director of the Company.
b. That Michelle Therese Kerdel be removed as a director of the Company.
c. That Anthony Read be removed as Secretary of the Company.
d. That Zenon Alexander be appointed a director of the Company.
e. That Zenon Alexander be appointed as Secretary of the Company."
7 I also set out orders 4 and 5 as sought in the originating process:
"4. An order under section 477(2B) of the Act granting Peter Charles Hicks as liquidator of the Company leave to enter into the agreement styled 'Deed of Advancement' as annexed to the affidavits in support of this application.
5. An order under section 482(4) that costs of this application and the costs of convening a meeting of members of the Company in accordance with order 3 above form part of the costs, charges and expenses of the winding up."
8 The s 482(1) application is made in circumstances where the liquidator has realised all assets of PFC, with the exception of a parcel of vacant land at Captains Flat, and has paid all proved and admitted debts in full. There were, however, insufficient funds to allow the liquidator to pay interest to which creditors with admitted debts have a statutory entitlement under s 563B.
9 According to the liquidator's affidavit, the amount required to cover s 563B interest up to the date at which proved debts were paid in full is $330,210.18. Of this, all but $37,738.24 is attributable to Syfind and PFA in their capacity as creditors (I am not sure how $37,738.24 tallies with the aggregate of the sums in order 2 but the matter is not important at this point).
10 Syfind and PFA wish to see the winding up terminated so that they may enjoy, through their ownership of the whole of the issued share capital of a rehabilitated PFC, indirect ownership and effective control of the Captains Flat land. To that end, they indicated to the liquidator that, in order to facilitate termination of the winding up, they would forego their own entitlements to interest under s 563B and "advance" - which really means simply "pay" - a sum of money to PFC sufficient to enable the liquidator to pay the s 563B interest of all other creditors in full. The intention was that this money would be used to satisfy the statutory interest entitlements of those other creditors so that PFC then had assets consisting of the Captains Flat land and a small amount of cash to enable the liquidator to defray minor remaining costs, against which stood no liabilities.
11 A deed was executed on 17 June 2010 with a view to implementing these intentions with respect to s 563B interest. Pursuant to the deed, $37,738.24 was paid to the liquidator on terms that it would be applied in meeting the interest entitlements of creditors other than Syfind and PFA. It was provided, however, that the funds were not to be applied by the liquidator in that way until a particular condition had been satisfied, namely, that certain orders had been made by the court.
12 The deed also embodied releases by Syfind and PFA of their entitlements to s 563B interest. This was subject to the same condition concerning the making of specified orders by the court.
13 The orders central to the condition operative under the deed for the two purposes I have mentioned were set out in a draft form of originating process attached to the deed. They correspond with orders 1, 2, 3, 4 and 5 set out at paragraphs [4] to [7] above. Satisfaction of the condition in the deed will therefore occur if and when the court makes orders 1, 2, 3, 4 and 5 as now sought.
14 In the events that have happened, the liquidator, having received the sum of $37,738.24 under the deed, satisfied the s 563B entitlements of creditors (other than Syfind and PFA) without the stipulated condition with respect to the making of court orders having been fulfilled. This was done inadvertently. At this point, therefore, those creditors may be taken no longer to have unsatisfied interest entitlements.
15 The like entitlements of Syfind and PFA under the winding up have not been satisfied; nor, however, are releases on their part in that respect operative at this point since those releases are subject to the condition that the court make the specified orders.
16 If and when the orders relevant to the deed condition are made, the effect of the deed will be, so the plaintiffs maintain, that the interest entitlements of Syfind and PFA will no longer need to be taken into account by the liquidator and the position will be that PFC has the single asset of substance and no liabilities, with the result that the court may, it is said, safely terminate the winding up.
17 Unless the court makes all of orders 1, 2, 3, 4 and 5 set out in paragraphs [4] to [7] above, however, the entitlements of Syfind and PFA to s 563B interest will continue and it will not be possible to view PFC in the way just mentioned. And unless and until PFC can be viewed in that way, there will be no apparent basis on which it will be appropriate to terminate the winding up.
18 It can be said at once that the court will not make order 2, that is, the order requiring the liquidator to make specified interest payments to certain persons. In the first place, the evidence shows that relevant payments have already been made, albeit "inadvertently". The court will not order to be done something that has already been done. Second (and even if the money had not been paid), there is no apparent basis on which the court would, in relation to the particular matter, exert compulsion upon the liquidator by way of mandatory order as distinct from, perhaps, advising him by way of s 479(3) direction that he would be justified in making the payments. Section 479(3) is identified in the originating process as one of the sections under which the orders are sought. But that section enables the court to give advice rather than to issue the kind of command reflected by order 2.
19 The fact that the court will not make order 2 is sufficient to lead to the conclusion, first, that the releases by Syfind and PFA under the deed will not be operative, second, that their entitlements to s 563B interest and the concomitant liability for that interest will accordingly remain and, third, that it is therefore not appropriate to terminate the winding up.
20 I proceed nevertheless to a brief consideration of aspects of the other orders sought.
21 Orders 1 and 3, taken together, raise an important question of timing. Section 482(1) is in these terms:
"At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order."
22 Section 482(3) provides as follows:
"Where the Court has made an order terminating the winding up, the Court may give such directions as it thinks fit for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up."
23 Dealing wit a general meeting to elect directors, therefore, s 482(3) says:
"Where the court has made an order terminating the winding up, the Court may give … directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up ." [emphasis added]
24 Directions for the convening of a general meeting can thus be made only if an order terminating the winding up has already been made. Furthermore, s 482(3) operates in a context where s 482(1) empowers the court to make an order "terminating the winding up on a day specified in the order". Read together, the two provisions mean that any terminating order must specify the day on which the winding up is to terminate by force of that order; and any order by way of direction for the convening of a general meeting to elect directors must, first, be made after the terminating order itself has been made (and hence after the court has "specified" in the terminating order the day on which the termination is to be effective) and, second, be framed in such a way that any election of directors resolved upon by the general meeting is to cause the persons elected to take office on the day on which the termination becomes effective, being the day "specified" in the terminating order.
25 In the normal course of events, an order under s 482(1) specifies a particular day as the day on which termination of the winding up takes effect, such as the day on which the order is made or the day seven days after that on which the order is made or the 30 June next following the making of the order. In the present case, there is a very substantial question whether the day on which any new director is elected by members at a meeting convened pursuant to a s 482(3) direction can be, in s 482(1) terms, "a day specified in the order". What follows if a s 482(1) order in those terms is made and no one is ever elected a director at a general meeting convened pursuant to a s 482(3) direction?
26 The answer, to my mind, is that it is not open to the court to order that the winding up be terminated on the day on which any new director is elected since that is not, in terms of s 482(1), "a day specified in the order".
27 I had occasion to consider the meaning of "specified day" in Re Rosaub Pty Ltd [2005] NSWSC 689; (2005) 192 FLR 395. That case concerned s 509(6) of the Corporations Act which permits the court to order that ASIC "deregister the company on a specified day". Section 509(6) bears a conceptual resemblance to s 482(1) in that each permits the court to order that an important change in a company's status occur on a "specified" day and accordingly empowers the court to "specify" the day on which the change is to be effective. I quote from the judgment in Re Rosaub Pty Ltd at [14] to [16]:
"[14] The form of order now sought (expressed, as it is, in the alternative) raises a question as to the meaning of 'a specified day'. A fixed date (such as 31 December 2005 or 1 January 2006) is, clearly enough, a 'specified day'. So too is a day precisely identified otherwise than by its date (such as 'Good Friday 2006') and, perhaps, a day described by reference to some past and identifiable event, such as 'the first anniversary of the date of acceptance' of an identified offer made in the past: Esanda Finance Corp Ltd v Lancaster (unreported, WA Sup Ct, Malcolm CJ, Pidgeon, Seaman JJ, 20 December 1990, 8 of 1990). In some contexts, 'there may be the sufficient specification of a period by reference, not to a definite point of time, but to the occurrence of an ascertainable event': Re Karounos; Ex parte Official Trustee in Bankruptcy (1989) 25 FCR 177 per Sheppard J.