Deputy Commissioner of Taxation v Tull Reinforcing Pty Ltd

REASONS FOR JUDGMENT 1 This is an application by the Deputy Commissioner of Taxation under s 459P of the Corporations Act 2001 (Cth) ('the Corporations Act') for an order that Tull Reinforcing Pty Ltd ('the company') be wound up in insolvency under s 459A of the Corporations Act. The application was made on 28 February 2006. In addition to the winding up order, the Deputy Commissioner seeks an order that Mr Hugh Sutcliffe Martin, an official liquidator, be appointed as liquidator of the company and an order that the company pay the Deputy Commissioner's costs on a party and party basis. The application is supported by an affidavit. The basis of the application is the alleged insolvency of the company and the allegation of insolvency is grounded on the failure by the company to comply with a statutory demand: s 459C of the Corporations Act. 2 The application was listed for hearing before a Registrar of the Court on 29 March 2006 at 9.30 am. 3 Mr Martin was appointed the administrator of the company under Pt 5.3A of the Corporations Act by the directors on 7 March 2006. On 29 March 2006 at 9.00 am, Mr Martin convened a meeting of the creditors of the company. Two creditors attended, one of whom was the Deputy Commissioner. The creditors resolved that the company be wound up under s 439C of the Corporations Act and Mr Martin thereby became the liquidator of the company. 4 The Deputy Commissioner appeared before the Registrar on 29 March 2006 at 9.30 am and she maintained her application for an order winding up the company in insolvency. The application was adjourned to 12 April 2006 so that it could be advertised and other documents filed. It was adjourned on 12 April 2006 to 19 April 2006 because of a query about the due and proper service of the liquidator's consent. 5 The application came before the Registrar on 19 April 2006. The Deputy Commissioner indicated that in addition to the orders set out in the application, she was seeking an order under s 482 of the Corporations Act that the creditors' voluntary winding up be terminated. Pursuant to s 35A of the Federal Court of Australia Act 1976 (Cth) and r 16 and Schedule 2 of the Federal Court (Corporations) Rules 2000, a Registrar may exercise certain powers in the Corporations Act, but the power in s 482 is not one of them. With respect to orders in relation to winding up applications, item 48 of Schedule 2 to the Rules provides that a Registrar may exercise the powers in the following: 'sections 459A, 459B (except in respect of applications under section 246AA), 459C, 459D, 459P, 459R, 459S, 459T, 461, 462, 464 and 465B, 465C, 466, 467, 467A and 467B (except in respect of applications under section 246AA)' Of the above list, it should be noted that a Registrar may exercise the powers in ss 459A and 459B and, subject to an exception not presently material, in s 467B. 6 The Registrar considered that she did not have the power to make an order under s 482 and so she referred the application to a Judge of this Court. 7 The application came before me on 28 April 2006 and, on the application of the Deputy Commissioner for a short adjournment, again on 1 May 2006. By this time the Deputy Commissioner had put forward a further argument and that was that there was no need for an order terminating the voluntary winding up and that I could simply make an order winding up the company in insolvency. 8 The advertising and other requirements of the Corporations Act have been complied with and the liquidator consents to an order that the company be wound up in insolvency. He consents to acting as the liquidator under the proposed orders. The Australian Securities and Investment Commission is aware of the application and has not sought to make submissions. 9 Two questions arise. Should an order be made winding up the company in insolvency, having regard to the fact that the company is already in voluntary liquidation? If the answer to the first question is yes, is it necessary to first make an order terminating the voluntary winding up? 10 Because of the importance of the second question to the Registrar's jurisdiction to make the orders sought in this and similar cases, I propose to deal with the second question first. 11 The Deputy Commissioner's application is made under s 459P of the Corporations Act and she seeks an order under s 459A that the company be wound up in insolvency. Under s 467B, the company may make an order under ss 233, 459A, 459B or 461 even if the company is being wound up voluntarily. Section 482 is in the following terms: '(1) 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. (1A) An application may be made by: (a) in any case - the liquidator, or a creditor or contributory, of the company; or (b) in the case of a company registered under the Life Insurance Act 1995 - APRA. (2) On such an application, the Court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter. (3) 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. (4) The costs of proceedings before the Court under this section and the costs incurred in convening a meeting of members of the company in accordance with an order of the Court under this section, if the Court so directs, forms part of the costs, charges and expenses of the winding up. (5) Where an order is made under this section, the company must lodge an office copy of the order within 14 days after the making of the order.' 12 In my opinion, it is not necessary to make an order terminating the voluntary winding up of the company before making an order winding up the company in insolvency. It seems to me that s 467B contemplates an order winding up a company in insolvency even though the company 'is already being wound up voluntarily'. 13 I note that there was no suggestion in various authorities I have considered that an order terminating the voluntary winding up was necessary. 14 In Citrix Systems Inc v Telesystems Learning Pty Ltd (in liq) (1998) 28 ACSR 529, Moore J made an order that a company be wound up in insolvency in circumstances where it was being wound up voluntarily, and there was no suggestion that an order terminating the voluntary winding up was necessary. 15 In Re Green (as liq of Australian Resources Ltd (in liq) (2004) 52 ACSR 452, Barrett J made an order that the company be wound up in insolvency in circumstances where it was the subject of a creditors' voluntary winding up arising from a voluntary administration under Pt 5.3A and there was no suggestion that an order terminating the voluntary winding up was necessary. 16 In the circumstances, the Registrar's lack of power to make orders under s 482 is no obstacle to her power to make an order winding up the company in insolvency. 17 A court will not make an order winding up a company in insolvency in circumstances in which the company is already the subject of creditors' voluntary winding up unless there is good reason to do so: Carter (as liq of New Tel Ltd (in liq)) v New Tel Ltd (in liq) (2003) 44 ACSR 661 per Austin J at 663(5); Re Green (as liq of Australian Resources Ltd (in liq)) (supra) per Barrett J at 453 [5]. The reason for this is that, in the ordinary case, there is little practical difference between a creditors' voluntary winding up and a form of winding up imposed by order of the court. 18 In the authorities, various reasons for making an order in such circumstances have been put forward and held to be sufficient. One reason which has commonly been put forward is that a change of liquidator is desirable. That reason will be sufficient if the liquidator has not given the appearance of being independent: Citrix Systems Inc v Telesystems Learning Pty Ltd (in liq) (supra) per Moore J at 535-537, but, on the other hand, a mere desire to replace a liquidator is not sufficient: Re Green (as liq of Australian Resources Ltd (in liq)) (supra). The fact that an insurance policy responding to claims for insolvent trading by directors may cover such claims only if the liquidator is appointed by the court may be a sufficient reason: Re Green (as liq of Australian Resources Ltd (in liq)) (supra), as may the fact that a charge or certain dispositions of property may only be challenged if the court has ordered the company to be wound up under s 459A: Carter (as liq of New Tel Ltd (in liq)) v New Tel Ltd (in liq) (supra). 19 None of those circumstances are present in this case, nor is it suggested by the Deputy Commissioner that an order of the court winding up the company in insolvency will provide a benefit to the general body of creditors of the company. Clearly, there may be circumstances, other than those I have discussed, which could provide a sufficient basis for an order winding up the company in insolvency even though it is already the subject of a voluntary winding up. However, the Deputy Commissioner frankly conceded that the only matters she could point to were the fact that there was no objection to the order sought and that it would enable her to recover the costs of the application. The fact that there is no opposition to the proposed order cannot, to my mind, be a good reason for making the order; nor can the desire to recover costs, although I appreciate that the Deputy Commissioner made her application some days before the company was placed into administration and then later into voluntary liquidation. 20 I see no good reason to make an order that the company be wound up in insolvency in circumstances where it is already in voluntary liquidation.