Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd

CATCHWORDS : CORPORATIONS - winding up - rights of creditors and contributories - where affairs of three companies intertwined and separate positions not readily ascertainable - all creditors of every company vote in favour of pooling proposal - sole member of only company likely to yield surplus also assents to pooling proposal - such proposal sufficiently articulated and explained - no resort to statutory mechanisms - unanimous assent sufficient to warrant direction that liquidator justified in proceeding on pooled basis

LEGISLATION CITED : Corporations Act 2001 (Cth), Parts 5.3A, 5.6 Div 6, ss.439A, 477(1)(c), 477(2)(a), 510, 511,

Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 24 ACSR 79 Motor Terms Co Pty Ltd v Liberty Insurance Ltd (1967) 116 CLR 177 Re Charter Travel Co Ltd (1997) 25 ACSR 337 Re Duomatic Ltd [1969] 2 Ch 365 CASES CITED : Re Express Engineering Works Ltd [1920] 1 Ch 466 Re Norfolk Island & Byron Bay Whaling Co Ltd [1970] 1 NSWR 221 Re Switch Telecommunications Pty Ltd (2000) 35 ACSR 172 Re Tayeh & Anor (as joint liquidators of the Black Stump Enterprises Pty Ltd & Ors) (2005) 53 ACSR 684 Re The Black Stump Enterprises Pty Ltd (2005) 228 ALR 591 United States Trust Co of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131

PARTIES : Kenneth Michael Whittingham - Applicant

SOLICITORS : Blake Dawson Waldron - Applicant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

3720/06 KENNETH MICHAEL WHITTINGHAM RE HUNTER VALLEY GRAVEL SUPPLIES PTY LTD & 2 ORS JUDGMENT 1 This is another case in which the liquidator of each of several associated companies seeks the assistance of the court in causing the assets of all the companies to be "pooled" and applied towards satisfaction of the claims of the creditors of all companies as a single body. It is the first such application to come before this court since the general issue of such "pooling" received the attention of the Court of Appeal in Re The Black Stump Enterprises Pty Ltd (2005) 228 ALR 591. 2 Mr Whittingham is the liquidator of each of Hunter Valley Gravel Supplies Pty Ltd ("Gravel"), Hunter Valley Stemming Supplies Pty Ltd ("Stemming") and Collins Crushing Pty Ltd ("Crushing"). He was previously appointed by the sole director of each company, Mr Collins, to be its voluntary administrator under Part 5.3A of the Corporations Act 2001 (Cth). Each winding up is the kind of creditors' voluntary winding up that follows on from Part 5.3A administration pursuant to s.439C. 3 Mr Collins, as well as being the sole director of all three companies, is the sole member of each of Gravel and Stemming. He and his wife are the only shareholders of Crushing. An account of the method of operation of the companies given in Mr Whittingham's affidavit shows that they were closely linked in a day to day sense. Gravel had rights to extract soil and sand from land owned by other persons. It established and operated a quarry. Material won from the quarry was sold by Gravel. But Gravel did not own any plant or equipment. The machinery it used was either owned or leased by Stemming or Crushing. The machinery was subject to financial obligations in favour of financiers. The financial aspects of the arrangements, as among the three companies, under which Gravel used the machinery of Stemming and Crushing are obscure. The liquidator has been unable to get to the bottom of them. It seems that some of the payments due by Stemming and Crushing to the machinery financiers were made by Gravel, that Gravel made payments into the bank accounts of the other companies for this purpose, that Stemming obtained funds to the extent of $50,000 from some unidentified source and that that sum was placed into a term deposit which was made available for Gravel's benefit as security. 4 Mr Whittingham's opinion, based on the material he has been able to assemble, is that the assets, income and liabilities of the companies "were utilised and applied by the sole director of the companies and shared randomly by him against each of the companies". 5 Mr Whittingham has taken quite extensive action in an attempt to discover the true position, including by retaining computer experts to attempt to retrieve deleted computer records and by enlisting the services of a forensic accountant in his own firm. He has reached a point where further progress will entail either or both of two courses: first, the issue of examination summonses so that Mr Collins and the former accountant of the companies can be questioned in a formal setting; and, second, a major exercise of reconstruction by the forensic accountant. Mr Whittingham is reluctant to undertake either of these courses because of expense, delay and uncertainty whether they will clarify the position to any appreciable extent. 6 The uncertainties relate mainly to the state of the inter-company indebtedness among the three companies. That alone is sufficient to mean that there are great difficulties in administering each winding up separately from the others. Although Mr Whittingham refers in his affidavit to uncertainty about whether particular people are creditors of one company or the other, it is made clear that the "universe" of creditors, if I may call it that, has been reliably identified. Three persons are said to be creditors of all three companies: the Commissioner of Taxation, Gowing & Co and Mr Collins. Beyond that, the only company said to have creditors is Gravel. Five persons, in addition to the three just mentioned, are identified as creditors of Gravel. For reasons which will become apparent presently, I do not think there is any need to attempt to reach any concluded view as to which of the companies is in truth indebted to each of the eight identified creditors. 7 Doing the best he can with the limited material available, Mr Whittingham has estimated that, in separate administrations, the returns to creditors might be of the order of 7 cents in the dollar for Crushing, 55 cents in the dollar for Gravel and 100 cents in the dollar for Stemming, with a surplus for the sole contributory, Mr Collins, being available in the last case. Under pooling, however, there would be a uniform return of 70 cents in the dollar for creditors, with nothing for Mr Collins as the sole member of Stemming. 8 It follows from what I have just said, that, on Mr Whittingham's calculations, the surplus for the sole contributory of Stemming would be eliminated by pooling were adopted. There will be no surplus for the contributories of the other two companies whether or not pooling is adopted. 9 It is also to be noted that pooling will, on Mr Whittingham's figures, entail disadvantage to the creditors of Stemming, viewed alone - that is to say, without regard for their interests as creditors of the other two companies. But when those other interests are taken into account and it is remembered that each of the three creditors of Stemming (the Commissioner of Taxation, Gowing & Co and Mr Collins) is also a creditor of both Gravel and Crushing, it is seen that the creditor position of each of the three parties will, in an overall sense, be improved by pooling. 10 I turn now to the steps Mr Whittingham to acquaint creditors with the pooling proposal and to obtain their consent to it. 11 The pooling possibility was first raised by Mr Whittingham in his reports made to the creditors of the several companies under s.439A. Each such report is dated 12 September 2005 and contains a statement as follows: "Due to the lack of clarity or distinction by the Director between the Companies in the Collins Group, together with the lack of proper accounting records, there may be reason to make application to the Court for a Pooling Order, whereby the assets and liabilities of each of the companies in the group are pooled, and a distribution made in accordance with the standard priorities afforded under the Corporations Act. I will advise creditors in due course as to my opinion on this issue." 12 After the companies had passed into voluntary winding up, there were resolutions of the creditors of each to undertake an investigation of the accuracy of the intercompany loan accounts following receipt of certain information. Mr Whittingham reported the results to creditors in a circular dated 2 May 2006. The circulars also reported the result of the forensic accountant's investigation. Each circular continued: "I approached Mr James Marshall of Blake Dawson Waldron Lawyers ('BDW'), for advice on the findings of the investigation and the best approach to maximise the return to all creditors and shareholders. Mr Marshall recommended that the assets and creditors of the Collins Group be pooled so that the windings up proceed as one. His advice is that the affairs of the companies were 'inextricably mixed'. Furthermore, the books and records of the companies are incomplete and would be difficult and expensive to reconstruct. Therefore, it is in the best interests of the creditors and the liquidations to consolidate, i.e. pooling. This would achieve a fairer and more equitable distribution to creditors, given all the circumstances of these matters. Mr Marshall advised pooling could be achieved by implementing one of the following options. Option 1 By convening and holding meetings of creditors to pass resolutions to consolidate (i.e. pool) and then apply to the Court for approval following the meeting of creditors. All creditors must be unanimous on the consolidation . Option 2 Application is made to the court to appoint myself as an administrator of the Collins Group and enter into a pooling Deed of Company Arrangement. Based on the advice from Mr Mashall, I consider Option 1 more viable as the process is shorter and less expensive." 13 The circulars went on to outline Mr Whittingham's calculations of possible financial outcomes for creditors in the alternative circumstances of pooled administrations and separate administrations. The explanation was as stated at paragraph [7] above. The explanation was supplemented by a table of comparative figures (page 320 of Exhibit KW1). 14 Meetings of creditors of the three companies were held on 17 May 2006. The minutes of each meeting are in evidence. They show that the "pooling proposal" represented as requiring the assent of all creditors was extensively discussed at each meeting. The minutes also show that all creditors of the particular company were present in person or by proxy and that each voted in person or by proxy. The following resolution was passed at the meeting of the creditors of Crushing with every vote cast being in favour: "To pool all the assets and liabilities of Collins Crushing Pty Ltd with those of Hunter Valley Gravel Supplies Pty Ltd and Hunter Valley Stemming Supplies Pty Ltd."

Corresponding resolutions were passed in like manner at the two other meetings. 15 Tabled at each meeting was a comprehensive document comparing the possible financial outcomes in the different eventualities. 16 The evidence satisfies me that the full implications of pooling were made known to the creditors and that they must be taken to have made, at the meetings of 17 May 2006, fully and properly informed decisions as to where their interests lay. Furthermore, I am satisfied that the unanimous decisions at the three meetings reflect the combined and concerted will of not only the totality of the creditors of each company but also the totality of the creditors of all three companies. All the creditors of each company have agreed that their rights should be modified in the way that the pooling proposal entails; and they have done so on the basis of what Santow JA described in the Black Stump case (at [38]) as "a clear and simple explanation of the qualitative difference between creditors claiming against a known debtor company as against claiming against a group of companies, assuming a pro rata distribution to creditors in the latter case with the latter amount only having to be quantified". 17 I have mentioned the impact that pooling would have on the position of Mr Collins as the sole contributory of Stemming. His explicit and specific concurrence in the pooling process was conveyed to Mr Whittingham by a letter dated 29 June 2006: "I refer to the meeting of creditors of HVSS held on 17 May 2006, at which I was present in person. I confirm that at that meeting, I voted in favour of the resolution put to creditors at that time, to 'pool' the assets and creditors of HVSS with those of Hunter Valley Gravel Supplies Pty Ltd (In Liquidation) ACN 081 382 452, and Collins Crushing Pty Ltd (In Liquidation) ACN 067 112 476 (together with the Companies). I assented to the resolution to 'pool' both in my capacity as an unsecured creditor of HVSS and in my capacity as the sole shareholder of that company. Furthermore, I voted in favour of the resolution to 'pool' being fully informed and aware of all of the issues relevant to my position as an unsecured creditor and as the sole shareholder of HVSS, including that my entitlement as the sole shareholder of HVSS, to be paid the surplus which HVSS would have had once all of its creditors were paid out in full, would be lost if the 'pooling' was to take place. I understood that a consequence of 'pooling' the surplus would instead be shared by the creditors of all the Companies. On this basis, I confirm that my assent and agreement with the resolution to 'pool' the assets and creditors of HVSS with those of the other Companies on 17 May 2006, was fully informed and given both in my capacity as an unsecured creditor of HVSS and in my capacity as the sole shareholder of HVSS." 18 Again, therefore, it is clear that Mr Collins has expressed full and informed consent to the impact that pooling will have on him as the sole contributory of Stemming. 19 While every relevant person may thus be seen to have submitted to such change of the person's position and rights as pooling will produce, it remains to consider whether the relevant expressions of acceptance (being positive votes cast at meetings, in the case of creditors, and the letter of 29 June 2006 to Mr Whittingham in the case of the sole contributory of Stemming) are themselves sufficient to change legal rights - or whether those expressions of opinion can be translated into changed legal rights by order of the court. 20 In Black Stump, Young CJ in Eq, who delivered the leading judgment, referred to earlier cases in which the court had assisted the effectuation of pooling arrangements and said (at [16] - [17]):

"[16] One cannot just cite them as saying that the Court has power to authorise a pooling of assets. Indeed, it is quite clear to me that the Court has no such power. When a company goes into liquidation there is no change in the property that each of the creditors have, each has a claim against the company for debt, damages or what have you. The only difference is the way in which that claim will be considered. Instead of the court deciding it, a proof of debt is put in and at least in the first instance the liquidator decides whether to admit the proof of debt or not.

[17] However, before and after the liquidation the creditor has a legal or equitable right enforced against the company. There is no authority on anybody other than where there is a waiver or contract made by the claimant to forego, vary or modify that claim, or where a scheme of arrangement under the Corporations Act permits a prescribed majority to overrule individual rights, for those rights to be altered. The Court has no power to do so even if it might appear to be expedient, commercially, to do so." 21 Young CJ in Eq then went on to refer to the particular methods that had been referred to at first instance. The relevant passage in the judgment at first instance is as follows (Re Tayeh & Anor (as joint liquidators of the Black Stump Enterprises Pty Ltd & Ors) (2005) 53 ACSR 684 at p.688): "These cases [that is, Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209; 24 ACSR 79; Re Charter Travel Co Ltd (1997) 25 ACSR 337 and Re Switch Telecommunications Pty Ltd (in liq); Ex parte Sherman (2000) 35 ACSR 172 ; [2000] NSWSC 794 ] - as well as Mentha v GE Capital Ltd (1997) 154 ALR 565; 27 ACSR 696; Re ACN 004 987 866 Pty Ltd (2003) 21 ACLC 1474 ; [2003] FCA 849, 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 Pt 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 Div 10 of Pt 5.3A where Pt 5.3A administration is in progress." 22 Pooling may also be allowed in a sixth case, described at [18] and [19] of the judgment of Young CJ in Eq in Black Stump: "[18] However, there are various ways of tackling the problem. One is to secure the assent of all the creditors involved. The decisions of single judges in equity show that provided valid attempts are made to do this, they will look with favour on arguments where in the circumstances there has been assent.

[19] However, in the instant case, what has happened is not one where one can say that there has been consents or assents by any of the creditors to waive or vary their rights. Nor has there been the facts which would show that there has been a compromise or arrangement between the creditors and the liquidators." 23 The same notion was recognised in the first instance judgment where, after references to statements of Young J in both Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 24 ACSR 79 and Re Charter Travel Co Ltd (1997) 25 ACSR 337, this was said (at p.688): "[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 ; [1920] All ER Rep Ext 850 and Re Duomatic Ltd [1969] 2 Ch 365 ; [1969] 1 All ER 161) 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; 17 ACSR 697, 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 [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." 24 Proposed short minutes of order handed up by Mr Golledge of counsel, who appeared for Mr Whittingham, contain orders as follows: "1. Pursuant to section 511 and s 477(1)(c) of the Corporations Act, the Court orders as follows: (i) that the resolutions passed at the meeting of the creditors of each of Collins Crushing Pty Limited, Hunter Valley Gravel Supplies Pty Limited and Hunter Valley Stemming Supplies Pty Limited held on 26 May 2006 and which are recorded at pages 342-344, 345-347 and 348-349 respectively to the affidavit of Kenneth Whittingham sworn 11 July 2006 are binding on the creditors of those companies; (ii) that the liquidator is justified in conducting the liquidation of the 3 companies in the following manner: a. that the liquidator shall combine the property of each of the companies into a single fund; b. that fund shall be distributed in accordance with the provisions of Part 5.6 Division 6 of the Corporations Act but as though the companies were a single company in liquidation and the creditors of the 3 companies were creditors of a single company in liquidation; and c. no amount is to be payable from that fund on account of any liability owing or claimed as between each of Collins Crushing Pty Limited, Hunter Valley Gravel Supplies Pty Limited and Hunter Valley Stemming Supplies Pty Limited. 2. Pursuant to section 477(2A) of the Corporations Act the compromise of debts owing as between each of Collins Crushing Pty Limited, Hunter Valley Gravel Supplies Pty Limited and Hunter Valley Stemming Supplies Pty Limited and which is constituted by the arrangement described in paragraph 1 hereof is approved. 3. The liquidator's costs and expenses in each winding up, approved in accordance with the provisions of the Corporations Act in each company shall be payable from the single fund created in accordance with sub-paragraph 1(ii)(a) above." 25 Mr Golledge submitted that proposed order 1 will, in the circumstances, be supported by a combination of ss.511 and 477(1)(c), but I am not satisfied that this is so. Section 477(1)(c) applies in a creditors' voluntary winding up via s.511(1)(b). It does no more than to empower a liquidator to make "any compromise or arrangement with creditors …". As has been pointed out in a number of recent cases, this section does not create any mechanism for binding dissentients - not that that is an issue here where all creditors of each company have positively expressed acceptance of the pooling proposal by means of votes cast. The real question, it seems to me, is whether the steps that have been taken are properly seen as an exercise by the liquidator of s.477(1)(c) power in the particular case. If they are, the court should make some appropriate order recognising the efficacy of the compromise. 26 Section 477(1)(c), in referring to "any compromise or arrangement with creditors", has in contemplation a "compromise or arrangement" between, on the one hand, the liquidator (being the repository of the power) and any one or more of the company's creditors - or, indeed, all of them. But for a "compromise or arrangement" to be "made" by the liquidator "with" a creditor or creditors, that creditor or all of those creditors must consent to the compromise or arrangement. The section itself does not make the compromise or arrangement binding: it can be binding only according to some non-statutory force. 27 There is, of course, a question whether the present circumstances involve a "compromise" or an "arrangement". The difference between the two is that "compromise" implies either a dispute about rights or a difficulty in enforcing them, whereas an "arrangement" need not (but may) involve any such dispute: see Re Switch Telecommunications Pty Ltd (2000) 35 ACSR 172 at p.181. On that basis, the present case is one of arrangement rather than compromise, in that the rights of the respective creditors of the several companies are not in dispute and there is, in essence, an intention that their rights be modified so that, instead of enjoying a right to a distribution out of the assets of a single company, each creditor has a right to receive a distribution out of the combined assets of all the companies. 28 To this, however, there is one qualification: to the extent that any of the three companies is a creditor of either of the other two, it foregoes the rights that that status gives it. That, I think, entails a compromise. 29 While "arrangement" is larger than and comprehends "compromise", the distinction between the two is, in the present case, important. While a liquidator has power under s.477(1)(c) to make a compromise or arrangement with any or all of the creditors, the liquidator must not "compromise" a debt of the company of more than $20,000 without the approval of the court, the committee of inspection or a resolution of creditors: s.477(2A). 30 I leave that matter to one side, however, as I am not sure that the particular processes that have been undertaken here in truth represent exercise by Mr Whittingham of the power invested in him by a combination of ss.477(1)(c) and 511(1)(b). Apart from what may come out of the letter from Mr Collins referred to at [17] above, the liquidator has not on the evidence "made" any arrangement "with" any creditor, in the sense of having entered into some form of consensual compact with the creditor. I emphasise the word "with". All that has really happened is that the creditors of each company have been invited to vote on a particular resolution at a meeting of creditors and have done so, thereby showing themselves to be content for the winding up of the company to proceed according to the modified course specified in the resolution. A person who votes at a meeting of a company (whether a meeting of creditors or a meeting of members) does not thereby engage in conduct of a contractual or analogous kind vis-à-vis the company or its directors and officers, including any liquidator. The person merely participates in a decision-making process which has consequences of its own. 31 I therefore prefer to proceed to the second and alternative basis on which Mr Golledge submitted that it should be found that there has been an effective variation of rights applicable in the several windings up. That alternative basis involves s.510 which is in the following terms:

" Arrangement: when binding on creditors (1) An arrangement entered into between a company about to be, or in the course of being, wound up and its creditors is, subject to subsection (4): (a) binding on the company if sanctioned by a special resolution; and (b) binding on the creditors if sanctioned by a resolution of the creditors.

(1A) The company must lodge a copy of a special resolution referred to in paragraph (1)(a) with ASIC within 14 days after the resolution is passed.

(2) A creditor must be accounted a creditor for value for such sum as upon an account fairly stated, after allowing the value of security or liens held by the creditor and the amount of any debt or set-off owing by the creditor to the company, appears to be the balance due to the creditor.

(3) A dispute about the value of any such security or lien or the amount of any such debt or set-off may be settled by the Court on the application of the company, the liquidator or the creditor.

(4) A creditor or contributory may, within 3 weeks after the completion of the arrangement, appeal to the Court in respect of the arrangement, and the Court may confirm, set aside or modify the arrangement and make such further order as it thinks just." 32 The concept here is one of arrangement between the company and the body of creditors, not arrangement "with" any individual. I am of the opinion that, on the evidence before me, all but one of the conditions necessary to be satisfied in order that s.510 may give sustaining force to the proposed pooling have been met. In saying that, I am paying attention to the several elements referred to as follows by Santow J in Re Switch Telecommunications Pty Ltd (above) at p.181: "[34] The principles which emerge from the case law on Corporations Law s 510 are as follows: (i) to be binding on non-voting or dissentient creditors, they must be paid pari passu with the voting creditors: Farmers' Freehold ; (ii) otherwise the non-voting or dissentient creditors need to consent to the arrangement; (iii) the concept of 'arrangement' is to be liberally construed and can embrace any proposal 'such as a reasonable business man might carry out bona fide in the course of his business': Re E D White Ltd (1929) 29 SR (NSW) 389 at 391 (Harvey CJ); (iv) as such, it may include a compromise: see Young J in Soluble Solution at 214 following E D White which is contra Contal Radio at 69; (v) the section only applies to voluntary liquidations: Contal Radio at 68-9; (vi) but, an arrangement which renders a company solvent so that a winding up resolution is not passed, is not covered by the section: Contal Radio ; Setco Manufacturing Pty Ltd v Sifa Pty Ltd (1982) 7 ACLR 327 (McLelland J) and Re Robinson & the Trustee Act 1925 [1983] 1 NSWLR 154 ; (1983) 8 ACLR 8 (Needham J): and such an arrangement needs to utilise the scheme provisions in Corporations Law Pt 5.1; (vii) another way of putting this is that although Corporations Law s 510(1) permits an 'arrangement' between a company and its creditors where the company is 'about to be … wound up', an actual winding up resolution is an integral part of the process; (viii) the arrangement resolution may be passed before the winding up resolution, because of the presence of the words 'about to be wound up', but the arrangement resolution will have no efficacy unless the winding up resolution is passed: Contal Radio at 69; and (ix) the voting majority on the resolution of creditors provided for in Corporations Law s 510(1)(a) is, by operation of Corporations Law s 510(2), by value, and by operation of reg 5.6.21 of the Corporations Regulations, by number. (The source of the regulation power is s 80 of the Corporations (New South Wales) Act 1990.)

[35] To this list I add my own view that 'completion of the arrangement' in Corporations Law s 510(4) means the date of passing the last of the sanctioning resolutions under Corporations Law s 510(1) and not completion of the implementation steps set out in the arrangement." 33 While, as I have said, I do not think that there is, in the present circumstances, any arrangement by the company "with" any individual creditor, I do think that there is an arrangement between the company and its creditors as referred to in s.510. That section, as I have said, is concerned with the creditors as a whole, not with any individiual creditor. 34 The terms of the relevant "arrangement" are, in my opinion, sufficiently set out in the extract from the circular to creditors quoted at [12] above, read in conjunction with the other parts of that circular (including those stating estimated returns in the different eventualities) making it clear that a central element was the foregoing by each company of any creditor claims it had upon the other two companies. The "arrangement" may not have been spelled out in the kind of detail one would expect to find in a s.411 document, but the concepts are not particularly complicated and, as I say, I am satisfied that the terms appear sufficiently from the circular. 35 The evidence shows that the procedural requirements of s.510(2) were satisfied in relation to each meeting of creditors held on 17 May 2006. That, coupled with the fact that all creditors of each company voted at the meeting of that company's creditors and all votes were positive means that the condition in s.510(1)(b) has been satisfied so as to make the arrangement binding on that company's creditors. 36 In one case (Stemming), I am satisfied that the s.510(1)(a) condition has also been fulfilled. Because Mr Collins is the sole member of Stemming, the letter of 29 June 2006 (see [17] above) must be regarded, according to the unanimous assent principle associated with cases such as Re Express Engineering Works Ltd [1920] 1 Ch 466 and Re Duomatic Ltd [1969] 2 Ch 365. In the case of each of Gravel and Crushing, however, there is no evidence that would justify a finding of satisfaction of the s.510(1)(a) condition. 37 It is in this last respect only that, in my view, the processes adopted cannot be said to meet all the requirements of s.510(1)(a). But that deficiency could be easily remedied if appropriate and simple action were taken by the members of Gravel and Crushing. It is by no means too late, as I see it, for the missing elements to be supplied. 38 Even without that missing element, however, I am satisfied that it would be appropriate to give the liquidator a direction that he is justified in proceeding in each winding up on the pooled basis. I say this because there has been, at creditor level, active and unanimous assent within each company (a greater measure of approval than is envisaged by s.510) and because, at shareholder level, either the sole shareholder has assented (I refer to the case of Stemming) or it is so clear that there will be no surplus for contributories and that the interests of shareholders may properly be regarded as non-existent (this is the position in Gravel and Crushing). While no statutory force for the arrangement can be obtained through s.510 (except perhaps in the case of Stemming), there has been, within each company, a clear and unambiguous acceptance of the sufficiently articulated pooling proposal by every person who ought properly to be regarded as having any conceivable interest in the winding up and whose position and rights are a matter for any concern of the court. 39 While it is obviously preferable for matters of this kind to be approached according to one of the statutory methodologies noted at [21] above, the court may, in a particular case, assist a liquidator in the way described by Young CJ in Eq at paragraph [19] of Black Stump (see [22] above). It will not do so except in a case of active and unanimous assent of all relevant persons. For the reasons I have stated, this is such a case. 40 The rationale for recognising the efficacy of active and unanimous assent to alter rights in a winding up should be briefly explained. When winding up begins, creditors are denied the rights that they would otherwise have to sue for their debts. They obtain instead a right to participate in a distribution in the winding up: Motor Terms Co Pty Ltd v Liberty Insurance Ltd (1967) 116 CLR 177 (see particularly the judgment of Kitto J at pp.180-181). Members are likewise denied the right to realise their shares and obtain rights to participate under the winding up. These rights of creditors may be varied by resort to the various mechanisms identified at [23] above. To the extent that these permit involuntary variation of rights, they entail statutory compulsion. But each individual is at liberty to agree to a variation of his or her rights. This was made clear by the Court of Appeal in United States Trust Co of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131. The position in relation to any perceived residuary participation by shareholders must be the same. It is recognised in cases such as Re Norfolk Island & Byron Bay Whaling Co Ltd [1970] 1 NSWR 221 that Part 5.1 provides machinery for overcoming the impossibility or impracticability of obtaining the individual consent of every relevant person. The same purpose underlies the other provisions which may become a source of compulsion. But where the individual consent of every relevant person is in fact obtained, there is no need for resort to any statutory machinery and the unanimously agreed departure from the scheme of distribution laid down by the Act may, in accordance with the United States Trust Co case, be implemented in relation to all those persons. This, on my understanding, is the approach to active an unanimous assent underlying the Court of Appeal's decision in the Black Stump case. 41 I shall accordingly make, as order 1, an order as follows, together with orders 2 and 3 set out at [24] above: Direct the plaintiff as liquidator of each of Collins Crushing Pty Limited, Hunter Valley Gravel Supplies Pty Limited and Hunter Valley Stemming Supplies Pty Limited that he is justified in conducting the windings up of the three companies in the following manner: (a) that the liquidator shall combine the property of each of the companies into a single fund;

(b) that fund shall be distributed in accordance with the provisions of Part 5.6 Division 6 of the Corporations Act 2001 (Cth) but as though the companies were a single company in liquidation and the creditors of the 3 companies were creditors of a single company in liquidation; and

(c) no amount is to be payable from that fund on account of any liability owing or claimed as between each of Collins Crushing Pty Limited, Hunter Valley Gravel Supplies Pty Limited and Hunter Valley Stemming Supplies Pty Limited. **********

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