(2) The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just."
7 It is obvious that neither s.477(1)(c) nor s.506(1)(b) confers jurisdiction on the court. Section 477(1)(c) is concerned with court-appointed liquidators. It empowers such a liquidator to make any compromise or arrangement with creditors or other persons there mentioned. By virtue of s.506(1)(b), a liquidator in a voluntary winding up may exercise any power conferred by the Act upon a court-appointed liquidator, including, of course, the power under s.477(1)(c). That power is conferred in terms commencing with the words "Subject to this section". This brings into play a need for court approval in the particular cases mentioned in ss.477(2A) and 477(2B), as well as the controlling power of the court under s.477(6). But there is nothing to suggest that the present case is within s.477(2A) or s.477(2B), nor is the present application under s.477(6) which may be invoked only by a creditor, a contributory or ASIC. For present purposes, therefore, the plaintiffs, if they are liquidators, may resort to the s.477(1)(c) power, via s.506(1)(b), without any approval or other order of the court.
8 It is important to emphasise that s.477(1)(c) goes no further than allowing a liquidator to enter into a consensual compromise or arrangement with such, if any, of the creditors and other persons identified in the section as are minded to become party to the compromise or arrangement. Section 477(1)(c) is not a provision that can cause a compromise or arrangement to be binding on anyone who does not actively assent to it. I repeat, in that connection, what I said in Re Dean-Willcocks; Alpha Telecom (Aust) Pty Ltd (2004) 208 ALR 414 at [19] to [21]:
"… Sections 477(1)(c) and (d) are concerned with the form of compromise by which a particular creditor or particular creditors agree to a particular regime with respect to their debts alone. The provisions do not entail any ability for a majority to bind a minority. In the Companies Act 1862 (UK), the general equivalents of today's ss.477(1)(c) and (d) were ss.159 and 160. Those provisions were supplemented eight years later by s.2 of the Joint Stock Companies Arrangement Act 1870 (UK) the effect of which was to cause to be binding on creditors (or a class of creditors), as well as the liquidator and contributories, any compromise or arrangement proposed between a company in the course of winding up and it creditors (or the class) and approved both by a majority in number (representing at least 75% by value) of the relevant creditors voting on the matter and by the court. This 1870 provision was the forerunner of the present Part 5.1.
The effect of the provisions as they existed in 1871 was described by Sir W M James LJ in In Re Albert Life Assurance Co (1871) LR 6 Ch App 381:
'The 159th and 160th sections seem to me to provide that a company by its official liquidators, with the sanction of the Court, is to have exactly the same power of compromising both with its creditors and its debtors as an individual would have. It has the power of saying to any class of creditors, 'If you will take so much less than your claim, we will pay you that without raising any question'. And it has a right to say to the contributories who are the companies' debtors as to unpaid calls, 'Pay us so much of your debt, and we will put an end to all questions between us'. But that is a compromise, in the one case, between the company and its creditors who choose to accept it, and in the other between the company and its debtors who choose to accept it. There is nothing in the Act which enables one creditor to bind another creditor to accept a compromise, or which enables one debtor to bind another debtor with respect to paying a composition. And that was the difficulty which was felt when the Act of last session, the Joint Stock Companies Arrangement Act , 1870, was passed, which I cannot help thinking was passed with a view to this and other companies which were being wound up. That Act says that there shall be a power in the majority to bind the minority. But that majority must be a majority of creditors of each company which is compromising, and in order to enable the majority to bind the minority the Court must be satisfied that there is a meeting of creditors the amount of whose debts can be estimated, and that there are three-fourths of the creditors who have assented, before it will interfere to enforce that which the large majority think the most beneficial way for them to get their claims satisfied - merely applying to a winding-up in this Court the same principles as are applied in Bankruptcy to dealings between a bankrupt and his creditors.'
This analysis - coupled with the enactment of the 1870 legislation - must, in my opinion, make unreliable earlier cases in which ss.159 and 160 of the 1862 Act (present ss.477(1)(c) and (d)) were seen as possessing some compelling force as against non-assenting creditors: eg, Bank of Hindustan, China & Japan Ltd v Eastern Financial Association Ltd (1869) LR 2 PC 489, Re Commercial Bank Corporation of India and The East (1869) LR 8 Eq 241. To the extent that there are, in some of the modern cases, suggestions that ss.477(1)(c) and (d) may facilitate compromise of the claims of persons who do not actually assent to the compromise, there is, in my view, an attempt to afford to those provisions an operation they are incapable of having."
9 That leaves for consideration s.511 as a potential source of jurisdiction to make orders 1 and 2 sought by the plaintiffs. It was submitted on behalf of the plaintiffs that s.511(1)(a) may be invoked in such a way as to sanction departure by a liquidator from the scheme of application of assets and recognition of debts and claims laid down by the Corporations Act. Mr Rosenblatt relied, in that respect, on three decided cases, viz, Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209, Re Charter Travel Co Ltd (1997) 25 ACSR 337 and Re Switch Telecommunications Pty Ltd; Ex parte Sherman (2000) 35 ACSR 172.
10 These cases - as well as Mentha v GE Capital Ltd (1997) 154 ALR 565, Re ACN 004 987 866 Pty Ltd (2003) 21 ACLC 1474, Alpha Telecom (above) and Kassem v Sentinel Properties Ltd [2005] NSWSC 403 - recognise five procedural possibilities for giving effect to a pooling or consolidation of the kind sought in this case:
1. a scheme of arrangement between each company and its creditors under Part 5.1;
2. a compromise under s.477(1)(c) which is made applicable to voluntary winding up by s.506(1)(b);
3. an arrangement under s.510 between a company in the course of winding up and its creditors;
4. resort to the extensive jurisdiction created by s.447A, where applicable; and
5. a deed of company arrangement under Division 10 of Part 5.3A where Part 5.3A administration is in progress.
11 The plaintiffs, however, regard observations of Young J in both Soluble Solution and Charter Travel as indicating the availability of an additional course which relies upon s.511(1)(a) as a source of jurisdiction to make orders varying and affecting creditors' rights. In the former case, his Honour said:
"It would be possible for the court to advise a liquidator in a court winding up that he should consolidate debts, but it would be unlikely that the court would do so unless every creditor agreed or a regime was put in place for creditors to object."
12 In Charter Travel, Young J expanded on this by saying:
"As I indicated in my judgment in Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 24 ACSR 79, administration of two companies in insolvency conjointly is something that can occur only in exceptional cases. As I said at p85, this normally means a scheme of arrangement, but if no creditor objects and it is impracticable to keep the assets and liabilities of different companies separate, and the consolidation is for the benefit of creditors generally, then the Court might advise the liquidators concerned that they would be justified in consolidating the administration. Again, there would be cases where the consolidation could be considered as a compromise between the two liquidators and the various creditors of the companies under s477(1)(c) of the Corporations Law."
13 These statements, to my mind, represent no more than a recognition that a version of the unanimous assent principle which can, at shareholder level, override the need for particular procedures (a concept most often associated with Re Express Engineering Works Ltd [1920] 1 Ch 466 and Re Duomatic Ltd [1969] 2 Ch 365) is also capable of operating at creditor level in a winding up where, as the Court of Appeal confirmed in United States Trust Co of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131, creditors' participation rights by way of distribution are in the nature of private rights that the creditors may waive or vary by contract. Central to the possibility referred to by Young J is unanimous assent, express or implied. Section 511 would then be potentially of relevance as a means by which the court might, by way of determination of the question of the efficacy of the assent to achieve that legal result, re-assure the liquidator that creditors had effectively modified their rights in such a way as to make it appropriate for the liquidators to recognise the results of their unanimous assent.
14 It is important to emphasise that s.511(1)(a) is not - and can never be - a source of jurisdiction for the court to alter the incidence of statutory provisions or the rights of creditors or contributories in a winding up. Nor was it so treated in either the Soluble Solution case or the Charter Travel case. In the former case, orders were made under s.447A (the fourth of the possibilities mentioned at paragraph [10] above). In the latter case (as is made clear in the first three paragraphs of the judgment), there was no more than an order that the liquidators would be justified in convening a combined meeting of creditors of two companies to consider a pooling proposal, coupled with an order that, if the creditors "unanimously approved" the proposal, the liquidators would be justified in implementing it.
15 I turn now to the circumstances of this case. The possibility of pooling or consolidation of the nine windings up has been brought to creditors' attention. In a report of the plaintiffs as administrators in advance of what purported to be the second meeting of creditors under Part 5.3A, it was recommended that creditors resolve that each company be wound up. There was a single composite report dated 13 January 2005 in respect of all nine companies. The report said:
"As you are aware there are currently nine companies involved in this administration. We note that certain creditors, including some of the group's employees have expressed that they are unaware which company in the group of nine they are indebted by or have executed employment contracts.
Accordingly, it is the opinion of the administration that should the company be placed into liquidation, the liquidator would make an application to the Supreme Court of NSW pursuant to section 511 of the Act to seek direction to pool the assets and liabilities of the companies for the purpose of the liquidation process and in particular any dividend to creditors. If any creditors wish to discuss this issue they should contact me directly.
At this stage of the administration the group's books and records do not enable us to accurately identify the assets and liabilities of each Company. The costs of reconstructing the accounts of each of entity if this is at all possible would be such that, if this work was carried out, it would be unlikely that there would be a greater return to creditors. In addition, we submit that the pooling proposal would result in a more equitable treatment of creditors. We further submit that the affairs of all the companies in the group are intermingled or inextricably intertwined so that it could be said that creditors have been dealing with the group.
It was the impression of the creditors and employees that they were at all times dealing with the Black Stump or the Black Stump Group of companies and accordingly most invoices were addressed in that manner."
16 Mr Tayeh, one of the plaintiffs, deposes that no creditor took up the invitation in the last sentence of the second paragraph of the above extract from the report.
17 Apparently with a view to compliance with the statutory requirement with respect to the second meeting of creditors under Part 5.3A, there was held on 20 January 2005 what is described in the minutes as "second meeting of creditors of Black Stump Group of Companies (administrators appointed)". This appeared under a list of nine companies' names. The minutes record six persons as having been present in person and 24 as having been represented by proxies. Mr Tayeh is recorded as having acted as chairman. The minutes record the passing of a resolution:
"That the Company be wound up."