JACKSON J:
1 The plaintiff, Empire Capital Partners Pty Ltd, applies for the winding up of the defendant, CMB Investments 1993 Pty Ltd. The basis of the application is an unsatisfied statutory demand in the sum of $100,000 plus interest.
2 CMB Investments is a company associated with Christopher Michael Brown. On 25 March 2021, I appointed receivers to the property of Mr Brown and the property of CMB Investments. That was done in a different proceeding, WAD 59 of 2021 (Receivership Proceeding). Under the orders, the receivership ends on 15 June 2021.
3 The receivers now seek a stay or adjournment of the winding up application. They do so on the ground that appointing liquidators now will interfere with their functions as court appointed receivers, and lead to potential unnecessary duplication of effort and costs and confusion as to the respective powers and functions of the receivers and the liquidators. The receivers say that it is not in the interests of creditors of the company for another set of insolvency practitioners to be appointed in circumstances where the receivers are finalising their investigations and preparing a report concerning the property of the company. They submit that no order for the winding up of CMB Investments should be made during the period of their appointment.
4 The receivers rely on a line of cases which stand as authority for the proposition that a bankruptcy notice served after a court appointment of receivers to the property of the debtor is bad, because the interference with the court's order giving possession of property to the receivers which could result from a sequestration order is a contempt of court: see Re Solomon; Ex parte Reid (1986) 10 FCR 423; Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568, and the summary of those and other relevant authorities which Lehane J gave in Re Ling; Ex parte Enrobook (1996) 142 ALR 87 at 89-91. The receivers do not submit that there is any contempt of court here or that the statutory demand or winding up application are bad, but they say that these principles support by analogy the proposition that a winding up should not be permitted to interfere with court appointed receivership.
5 The plaintiff, Empire Capital, submits that those cases are distinguishable because of circumstances which include the fact that in those cases, there was a debtor opposing the bankruptcy on the basis that the appointment of an external controller to his or her assets or a freezing order made payment of the debt impossible. There is nobody in an analogous position for CMB Investments because its sole director was Mr Brown, and he became automatically disqualified upon the sequestration order being made against him. All of the issued shares in CMB Investments have vested in the trustee in bankruptcy pursuant to the sequestration order, but the trustee does not propose to appoint any new director. There is therefore nobody capable of acting for CMB Investments to oppose the winding up application. I do not consider that that is a relevant point of distinction, however, given that the receivers rely upon the line of authority for the broader proposition that it is undesirable for orders for the sequestration of the estate of an individual, and by analogy orders for the winding up of a company, to be made if the effect of that may be to interfere with the ongoing performance of the duties and functions of the court appointed receivers.
6 The receivers further submit that there is no need to make a winding up order now. CMB Investments has no current operations and, while it appears prima facie to be insolvent, it is not trading or otherwise continuing to incur debts, so the receivers say the usual reason for expedition when a company is to be wound up is absent here: cp e.g. Truong v HT Design & Construction Pty Ltd [2007] NSWSC 102 at [28]. Since the receivers have control of all of the company's property, there is no risk to creditors that that property will be lost.
7 The receivers say the winding up should be stayed or adjourned to a time after they provide their report to the court on their investigations into Mr Brown's estate and that of CMB Investments. That report is due to be provided on 15 June 2021 and there is an interlocutory hearing in the Receivership Proceeding listed for 30 June 2021 to consider what further orders, if any, might be appropriate arising out of the report. The receivers submit that once that report is given, the court can then make a fully informed decision about whether the company should be wound up. They also say that the report will be useful to whoever is appointed liquidator, if the appointment of a liquidator is made. There will be little benefit and possible detriment if the liquidators are appointed before the report is provided. The detriment will arise, for example, if the receivers' inquiries with multiple banks and betting agencies are terminated and the liquidators are required to take up those inquiries where the receivers left off.
8 Empire Capital's written submissions in response to the receivers' application for a stay or adjournment included the following passage, which sought to explain why no specific power to defend a winding up application had been included in the receivers' powers in the orders of 25 March 2021:
It would have been impermissibly restrictive for creditors of CMB Investments, to have had the Court fetter their right to enforce debts which are owed to them by the company, in order to allow certain persons who claim an interest in the assets of the company's director to have their chosen insolvency practitioners tinker around with the proceeds of a company that those persons thought at the time might have been about to receive a transfer of funds from that director: Paragraph 74 of the submissions of the plaintiffs in support of their freezing order dated 17 March 2021.
But this is precisely what the receivers are asking the Court to do now …
9 Several aspects of that submission require comment. Firstly, if an allegation is seriously advanced that receivers appointed as officers of the court are 'tinkering around' in their appointment, it should be backed up by specific and persuasive evidence that such a characterisation is warranted. Here there is no such evidence.
10 Secondly, the reference to 'certain persons who claim an interest in the assets of the company's director' needs to be explained. In the Receivership Proceeding the receivers were appointed to all the property of Mr Brown and CMB Investments. The applicants for the appointment of the receivers were six persons and companies to whom Mr Brown acknowledged he was indebted. The appointment was made with the consent of both Mr Brown, who was not a bankrupt at that time, and CMB Investments, so no reasons for decision were given. It is, however, apparent from the submissions in support of the freezing orders that the basis of the appointment over CMB Investments was evidence that Mr Brown intended to transfer allegedly substantial assets to that company (that is the paragraph 74 referred to in the passage just quoted). But the applicants in the receivership proceeding do not claim to be creditors of CMB Investments.
11 Thirdly, the implication in referring to the applicants in the Receivership Proceeding and their 'chosen insolvency practitioners' is that the receivers are acting in those applicants' interests, including in the course of their appointment over the assets of CMB Investments. But the receivers have been appointed by the court. Their duty is to identify, secure, preserve and protect all the receivership property. It is true that their stated purposes include the collection of property up to the total amount owed to the applicants. The purposes also include the payment of those debts to the applicants. But those purposes simply reflect the fact that the receivership orders were ancillary to the enforcement of those acknowledged debts and could therefore go no further than was reasonably necessary to assist in their recovery.
12 Importantly, the payment of the debts is subject to further direction of the court. More broadly, the receivers' paramount duty is to the court, which will supervise their work in the interests of all creditors. In Co-operative Farmers & Graziers Direct Meat Supply Ltd v Smart [1977] VR 386 at 391, Kaye J said:
A receiver appointed by the court is not an agent of or trustee for either the secured creditors at whose suit he was appointed or the company. He is responsible to the court and is not subject to the directions of or control by persons at whose instigation he was appointed: Corporation of Bacup v Smith (1890) 44 Ch D 395 per Chitty, J, at p. 398; Burt, Boulton and Hayward v Bull, [1895] 1 QB 276 per Esher, MR, at p. 279 and Rigby, LJ, at p. 284; and Boehm v Goodall, [1911] 1 Ch 155 per Warrington, J, at p. 161. It is the duty of a receiver and manager to do everything reasonable and right for the protection of the company's assets and property entrusted to him and to do so for the benefit of all persons interested in them: Re Newdigate Colliery Ltd., [1912] 1 Ch 468 per Cozens-Hardy, MR, at pp. 473-4 and Buckley, LJ, at pp. 477-8.
13 Any suggestion that the receivers here are acting inconsistently with those duties so as to advance the partisan interests of the applicants in the Receivership Proceeding would once again be a serious allegation which would need to be supported by substantial evidence. Here it is not supported by any such evidence.
14 It appears that underlying Empire Capital's submissions is a concern that receivers should not have been appointed to the property of CMB Investments at all. But the appropriate forum to raise that concern is the Receivership Proceeding in which the appointment was made. Liberty to apply was expressly granted to any persons affected by the orders. Empire Capital has not sought to exercise that liberty. So the starting point in this proceeding is that the receivers are in possession of CMB Investments' property, pursuant to orders of the court and, in the absence of evidence to the contrary, that they are investigating and collecting it in the interests of all creditors.
15 There was also a concern expressed in Empire Capital's submissions that the receivers had incurred and would continue to incur costs in the investigation of Mr Brown's assets which they could seek to recover from assets of CMB Investments. But in the course of the hearing today, the receivers have expressly disclaimed any such intention and Empire Capital has properly accepted that this concern has fallen away.
16 Empire Capital did, however, submit that the receivers' position on the stay or adjournment assumes that it is they and not the insolvency practitioners nominated by Empire Capital, KordaMentha, who would become liquidators of the company if it were wound up. I do not, however, see how anything the receivers are saying about the adjournment or stay which they seek turns on that matter. My understanding of the receivers' submissions is that it will be in the interests of all creditors for them to complete their investigations and report on the asset position of Mr Brown and CMB Investments before the court considers whether to wind the company up. Who is appointed liquidator if that happens is a separate question.
17 The court's discretion as to whether to stay or adjourn the application for winding up is unfettered, although of course it must be exercised judicially. Ultimately, it can, and should, be exercised where the interests of justice require: Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) [2011] HCA 18; (2011) 244 CLR 1 at [34].
18 In my view, a pragmatic judgment is required here as to what is most likely to be in the interests of the creditors of CMB Investments. The receivers have been in place since 25 March 2021. The receivership is nearly over, as it has been ordered to end on 15 June 2021. It may be inferred that the receivers are in the course of concluding their investigations and formulating their report to the court. The assets of CMB Investments are appropriately secured by reason of the receivers' appointment, and the company is not trading. The risk to creditors of dissipation of assets or the incurring of further debts, which often informs the desire of a court to determine winding up applications with expedition, is not present here.
19 There is no indication in the evidence that the receivers are acting otherwise than in the interests of all creditors of CMB Investments. There is no compelling reason to appoint another set of insolvency practitioners shortly before the receivers' appointment concludes, with what I consider to be the inevitable duplication of costs and effort that that will entail. The only specific evidence about the steps that would be taken by the liquidators nominated by Empire Capital, KordaMentha, if they were to be appointed now, is contained in the letter from KordaMentha to Empire Capital's solicitors. In it, KordaMentha indicate that they would consider whether a voluntary administration of CMB Investments is appropriate and, if they determine that it is, would make application to the court for themselves to be appointed as administrators. That letter also appropriately acknowledges that KordaMentha would attempt to avoid duplication of effort with the receivers. But it appears to me that if such an application were to be made, that could potentially lead to further costs which would ultimately be likely to be borne by the creditors of CMB Investments in circumstances where it is possible that waiting until the receivers provide their final report may indicate that a voluntary administration of CMB Investments is not the best course to take. That illustrates how any liquidators appointed after that report is received, whoever those liquidators may turn out to be, are likely to benefit from the completion of and contents of the report.
20 Empire Capital submitted that the appointment of liquidators before the completion of the report was desirable because it would mean that there would be somebody who would act as 'a voice for the company'. This is based on the circumstance I have already referred to, which is that there is neither a director nor shareholder of CMB Investments taking an active part in the present proceedings, or the Receivership Proceeding in those capacities, so there is nobody acting on behalf of the company who is there to oversee the activities of the receivers.
21 That is a legitimate concern to raise, but three responses to it can be made. Firstly, as has already been mentioned, the receivers are acting pursuant to orders of and under the supervision of the court, and the court will ensure that the receivers are acting in the interests of creditors of CMB Investments. Secondly, there is no apparent reason why the appointment of a further independent representative of the company is necessary in circumstances where the receivership is nearly over. Thirdly, to the extent that it is possible that there may be a need to take issue with the extent of the receivers' costs claimed in respect of CMB Investments (for example), that can be addressed by any liquidators who are appointed after the receivership ends. The receivers will need to obtain the court's approval for their costs and remuneration and the liquidators will be in a position to exercise appropriate scrutiny, supervision, oversight and, if necessary, opposition to that application.
22 In making that last observation, I express no preconceived view that there will or will not be a ground to allege that the receivers are charging more than they should, and also no preconceived view as to whether or not the possibility I have alluded to will give rise to any conflict of interest, should the receivers seek appointment as liquidators. It follows that I express no preconceived view as to the identity of any liquidators who may be ultimately appointed. That is a matter which, if it arises, will be for another day.
23 For these reasons, I consider that it is in the best interests of creditors to permit the receivers to conclude their investigations and to report to the court, before considering the question of whether CMB Investments should be wound up, including the question of the identity of any liquidators, should liquidators be appointed. Even attributing the best of intentions to all involved, it appears to me that the risk of duplication of effort and costs and the risk of confusion are real. I see no compelling reason to run that risk between now and the relatively imminent conclusion of the receivers' appointment.
24 The receivers primarily seek a stay; in the alternative, an adjournment. I see no need fora stay. The appropriate course, in my view, is to adjourn the winding up application to 30 June 2021, to be heard at the same time as the interlocutory hearing I have already mentioned which has been convened for the purpose of considering the receivers' report.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.