EX PARTE JACK ROBERT JAMES as liquidator of BLUEGOLD CORPORATION PTY LTD (IN LIQ) [2021] WASC 98 (8 April 2021)

(a) in any case - the liquidator, or a creditor or contributory, of the company; ...

1. The application is supported by an affidavit sworn by the liquidator on 16 March 2021, and an outline of submissions filed on 22 March 2021. The application is also supported by the affidavit of Elizabeth Ann McCann sworn on 22 March 2021, in which Ms McCann deposes to having served the originating process and the liquidator's affidavit on the Australian Securities and Investments Commission (ASIC).
2. The application was returnable on the Master's List on 1 April 2021 for directions. On 29 March 2021, the solicitors for the liquidator requested that the directions hearing be vacated and the application be determined on the papers.
3. On the basis of the materials filed, I propose to grant the application and to make the order pressed by the liquidator. These are my reasons.

1. The context in which the application was made was deposed to by Mr James and was conveniently summarised in the outline of submissions filed in support of the application, which summary is largely reproduced below.
2. On 8 May 2018, Mr James was appointed as the liquidator of the Company pursuant to an order of the Federal Court of Australia, and he is presently the liquidator of the Company. The application to wind up the Company was made by the Deputy Commissioner of Taxation on behalf of the Australian Taxation Office (ATO).
3. Following his appointment, the liquidator's investigations into the affairs of the Company indicated that, among other things:

(a) the ATO was the sole creditor of the Company and was owed about $518,814.31;

(b) the Company had tangible assets with a book value of $43,000 as at the date of the liquidator's appointment;

(c) there may have been various voidable transaction claims which may have been recoverable from various parties, including the sole director of the Company, Christopher Hodge, and his wife, Nina Hodge (neè Colebrook); and

(d) on or about 30 June 2011, Mr Hodge, Mrs Hodge and the Company had entered in a loan facility agreement (Loan Agreement), whereby the Company advanced loans to Mr Hodge and Mrs Hodge as joint and several borrowers pursuant to the Loan Agreement in the amount of $6,671,037, of which $3,691,815 remained outstanding (Outstanding Loan Amount).

1. In July 2019, Mr Hodge submitted a deed of company arrangement (DOCA) proposal for the Company to enter into voluntary administration and then into a DOCA. The proposal was the second received from Mr Hodge, his initial proposal submitted in August 2018 having been rejected. Following negotiations between the respective parties, the DOCA proposal was amended to provide that, among other things, the proponents under the proposed DOCA were to be both Mr Hodge and Mrs Hodge (together the DOCA proponents).
2. Mr James' evidence was that at that time, he considered that it was in the commercial and best interests of the Company's unsecured creditors for the Company to enter into the DOCA proposal. Mr James deposes that he held this view (and continues to hold this view):

(a) based on the information available to him in relation to the financial circumstances of the Company;

(b) having regard to the costs of any legal proceedings to recover the Outstanding Loan Amount, to enforce the Loan Agreement and / or to recover damages or compensation for any voidable transaction claims relative to the Company's ability to finance such proceedings; and

(c) having regard to the prospects of recovery of any judgment from Mr Hodge and Mrs Hodge.

1. On 23 March 2020, so that the Company's creditors could consider and vote upon entry into a DOCA as provided by the DOCA proposal, leave was granted to appoint Mr James and Paula Lauren Smith as administrators of the Company. On 24 March 2020, Mr James and Ms Smith were appointed as joint and several administrators of the Company.
2. On 8 April 2020 at a meeting of creditors convened under the Corporations Act s 439A, the creditors of the Company resolved that the Company execute a DOCA in accordance with the DOCA proposal and that Ms Smith and Mr James be appointed as joint and several deed administrators of that DOCA.
3. The DOCA was executed by Mr Hodge and Mrs Hodge on 20 April 2020, and by Mr James, Ms Smith and the Company on 21 April 2020. The property that was made available under the DOCA to pay a Creditor's Claim (as that term was defined in the DOCA) comprised payments to be made by Mr Hodge plus any and all amounts in the Company's Account as at the date of execution of the DOCA. Mr Hodge was to pay, in total, $400,000 under the terms of the DOCA.
4. The DOCA (as varied by a deed of variation executed by the parties in September 2020) was wholly effectuated and automatically terminated on 26 February 2021. Mr James and Ms Smith ceased on that date to be the joint and several deed administrators.
5. Mr James deposes that as at the date of his affidavit and pursuant to the terms of the (now terminated) DOCA:

(a) the costs (being all fees and disbursements) incurred by the liquidator, the administrators and the deed administrators had been paid;

(b) the Company's only creditor, the ATO, had received a dividend payment in satisfaction of the amount owed to it by the Company;

(c) the DOCA proponents had been fully and finally released from all claims that the Company and / or the liquidator had or may have had against them (including in relation to the various voidable transaction claims and the Outstanding Loan Amount); and

(d) the Company no longer had any creditors and was therefore solvent.

1. Clause 14 of the DOCA sets out the obligations of the deed administrator after effectuation of the DOCA. Relevantly, cl 14.2 provides that within 21 days of the effectuation of the DOCA, the deed administrator must prepare and file an application which seeks an order under s 482 of the Corporations Act that the winding up of the Company be terminated with no order as to costs. As the DOCA automatically terminated on 26 February 2021, the application was made by Mr James in his capacity as liquidator of the Company.
2. If such an order is made, the Company will be returned to the control of Mr Hodge as its sole director. As to the future of the Company, the liquidator deposes to having been informed by Mr Hodge that if the winding up of the Company was terminated by an order of the court and control of the Company was handed back to Mr Hodge, Mr Hodge does not presently intend to trade or otherwise operate any business through the Company.

1. As to the power to make an order under s 482(1), I note that while the order to wind up the Company was made by the Federal Court of Australia, the application to terminate the winding up may be made by this court.[1]

1. As to standing, I find that the liquidator has standing to bring the application to terminate the winding up of the Company pursuant to s 482(1A)(a).

1. As to notice of the application, the Supreme Court (Corporations) (WA) Rules 2004 r 2.8 requires that notice of the application be given to ASIC. Ms McCann deposes to having served the originating process and the liquidator's affidavit on ASIC. The papers also reveal that notice of the application was given to the Deputy Commissioner for Taxation on behalf of the ATO, being the petitioning creditor and formerly the sole creditor of the Company.[2]

1. There are no criteria specified in the Corporations Act to indicate when an application to terminate a winding up will be granted. The power to make an order under s 482(1) is discretionary and the onus is on the applicant to make out a positive case for termination.[3]
2. While the court does not have to find special reasons for granting an application to terminate a winding up, there must be some valid reason for the discretion to be exercised in favour of the applicant,[4] taking into account the interests of the creditors, the liquidator, the members of the company and weighing in the balance the public interest.[5]
3. As noted on behalf of the applicant, the factors that generally inform the exercise of the court's discretion to terminate a winding up include:

(a) the attitude and interests of creditors (including future creditors who might be prejudiced if the company was released from winding up);

(b) the interests of the liquidator (particularly with respect to costs) and contributories;

(c) the nature and extent of creditors and whether all debts have been discharged;

(d) the company's current trading position and general solvency;

(e) any explanation for any non-compliance by directors with their statutory duties and of the circumstances leading to the winding up order;

(g) the public interest including the public interest in upholding commercial morality.[6]

1. I accept the submission made on behalf of the liquidator that on such an application, two broad considerations must also be satisfied:

(a) first, that the state of affairs that required that the company be wound up no longer exists (that is, where the winding up was on grounds of insolvency, it is necessary to demonstrate that the company is no longer insolvent and is likely to remain solvent); and

(b) secondly, that it would be reasonable to entrust the affairs of the company, once again, to the directors, under whose management it previously failed.[7]

1. For completeness, I note that s 482(2A) provides that where an application under s 482 is in relation to a company subject to a DOCA, the court in determining the application must have regard to all of the matters as listed in ss 482(2A)(a) ‑ (f). I accept the submission made on behalf of the liquidator that s 482(2A) does not apply in respect of this application as the Company is no longer subject to a DOCA.

1. I am persuaded that it is appropriate for the discretion to be exercised as requested and that the winding up be terminated by an order of the court.
2. I have turned my mind to the attitude of and interests of creditors, including those who might be prejudiced if the Company was released from winding up. The evidence before me establishes that the Company's only creditor, the ATO, has received a dividend payment in satisfaction of the amount owed to it by the Company,[8] that the Company no longer has any creditors, and that the Company is solvent.[9] There is no creditor interest or potential prejudice to a creditor that weighs against the making of the order. The Deputy Commissioner for Taxation on behalf of the ATO has not sought to be heard in relation to this application. The fact that the ATO, the only former creditor, supported a DOCA that obliges the liquidator to now make this application weighs in favour of the order sought.
3. I have weighed in the balance the interest of the liquidator, particularly with respect to costs. The liquidator deposes that pursuant to the terms of the (now terminated) DOCA, the costs incurred by the liquidator, the administrators and the deed administrators have been paid. The interests of the liquidator, who applies for the order, do not weigh against the making of the same. Further, the fact that the application is made by the liquidator, and the application has the liquidator's support, weighs in favour of making the order.
4. I have weighed in the balance the nature and extent of the creditors and whether all debts have been discharged. The liquidator deposes to the basis for his belief that that ATO was the sole creditor in the liquidation of the Company.[10] Further, he deposes to the ATO having received a dividend payment in satisfaction of the amount owed to it by the Company.[11] The fact that all of the debts of the Company have been discharged and, on the evidence of a recognised insolvency practitioner, the Company is solvent by the effect of the now terminated DOCA weighs in favour of the making of the order.
5. On the evidence before me, I understand that Mr Hodge does not presently intend to trade or to otherwise operate any business through the Company. I have turned my mind to the Company's current trading position and the nature of the Company's business and I accept that neither matters weigh against the making of the order.
6. I have turned my mind to the public interest in the exercise of the discretion to allow the application. I accept the evidence of the liquidator as to the Company's financial position and that the Company is solvent. A concern to ensure that an insolvent company is not allowed to return to trade is abated on the liquidator's evidence.
7. As to the public interest, I have also weighed in the balance the liquidator's evidence that there may have been various voidable transaction claims which may have been recoverable from various parties, including the sole director of the Company, Mr Hodge, and his wife, Mrs Hodge. This evidence causes me to pause to consider whether the return of the Company to the director is contrary to the public interest. Such claims were not however prosecuted and remain untested.
8. I note that ASIC has been served with the originating process and supporting affidavit and has not sought to be heard.
9. I am satisfied that on balance, the liquidator has discharged the onus and the application should be granted. I am particularly persuaded by the fact that the state of affairs that required the Company to be wound up no longer exists. The Company's only creditor has received a dividend payment in satisfaction of the amount owed to it by the Company.[12] The Company no longer has any creditors and is solvent.[13] I am also satisfied that returning control of the Company to Mr Hodge, its sole director, is reasonable in circumstances where Mr Hodge does not presently intend to trade or otherwise operate any business through the Company. On the evidence before me, it is not necessary to give directions pursuant to s 482(3). No order for costs is pressed.

1. For the reasons set out above, I am satisfied that the liquidator has made out a positive case for termination and I will make an order in the following terms.
   1. With effect on and from the date of this order, the winding up of Bluegold Corporation Pty Ltd (In Liq) be terminated under s 482(1) of the Corporations Act 2001 (Cth).

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Maamari v Ringwood & Ply Pty Ltd (2005) 52 ACSR 370; 23 ACLC 314; [2005] NSWSC 40; Corporations Act s 58AA.

[3] El-Fahkri, in the matter of Elfah Pty Ltd (in liq) [2002] FCA 1469 [9]; Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685. See also Aetna Properties Pty Ltd v GA Listing & Maintenance Pty Ltd (1994) 13 ACSR 422.

[4] Alexander v Cambridge Credit Corporation Ltd; Aetna Properties Pty Ltd v GA Listing & Maintenance Pty Ltd, cited in El-Fahkri, in the matter of Elfah Pty Ltd (in liq) [9].

[5] El-Fahkri, in the matter of Elfah Pty Ltd (in liq), citing in relation to the public interest Re Telescriptor Syndicate Ltd [1903] UKLawRpCh 65; [1903] 2 Ch 174, 180; and Chan v Austgrove Enterprises Pty Ltd (in liq) (1993) 12 ACSR 427.

[6] Re On Q Group Ltd (In Liq) (subject to deed of company arrangement) (2014) 104 ACSR 470 [9], as noted in the outline of submissions par 17. See also El-Fahkri, in the matter of Elfah Pty Ltd (in liq); Re Telescriptor Syndicate Ltd, 180; Chan v Austgrove Enterprises Pty Ltd; and Lollback v Brakepower Pty Ltd [2010] NSWSC 1457 [63] - [64] (as to the significance of the attitude of the liquidator in a termination application).

[7] Re On Q Group Ltd (In Liq) [9]; Re Glass Recycling Pty Ltd [2014] NSWSC 439 [18] - [19], as cited in the outline of submissions at par 18.

[8] The affidavit of JR James par 37(b).

[9] The affidavit of JR James par 37(d).

[11] The affidavit of JR James par 37(b).

[12] The affidavit of JR James par 37(b).

[13] The affidavit of JR James par 37(d).