GIO NSW v Krey Investments Pty Ltd

LEGAL PRINCIPLES

1. Section 490(1) of the Corporations Act provides: When company cannot wind up voluntarily (1) Except with the leave of the Court, a company cannot resolve that it be wound up voluntarily if: (a) an application for the company to be wound up in insolvency has been filed; or (b) the Court has ordered that the company be wound up in insolvency, whether or not the order was made on such an application; or (c) the company is a trustee company that is in the course of administering or managing one or more estates.
2. Only s 490(1)(a) is relevant to the present application.
3. The following principles emerge from the cases that have considered the application of s 490(1): 1. Section 490(1) confers upon the court a broad discretion as to the factors to be taken into account in determining whether leave should be given: In the matter of Tow.com.au Pty Ltd (In Liquidation) [2018] FCA 1069, Greenwood ACJ at [3]. 2. The leave in s 490(1) can be granted retrospectively: Re Horsham Kyosan Engineering Co Ltd [1972] VR 403, Gowans J at 406; Progress Printers & Distributors Pty Ltd v Production & Graphics Communications Pty Ltd (1996) 21 ACSR 241, Tamberlin J at 244; Re Pendonna Pty Ltd [2012] NSWSC 631, Brereton J at [2]; Re U-Nited Warranties Pty Ltd [2012] NSWSC 1087, Black J at [3]. It has been said that it will be a rare case in which that leave will be granted retrospectively: Pendonna, Brereton J at [3] citing GIO NSW v Krey Investments Pty Ltd (unreported, Supreme Court of New South Wales, Young J, 29 October 1990). 3. It is ordinarily necessary to establish that it is preferable that the company be wound up voluntarily, rather than compulsorily: Re Northwestern Fruit Growers Pty Ltd [1965] VR 306, Adam J at 309-11; Re South Australian Air Conditioning Centre Pty Ltd (1977) 2 ACLR 539, Jacobs J at 541-2; Pendonna, Brereton J at [3]; U-Nited Warranties, Black J at [3]; Re Halal Meats Australia Pty Ltd [2016] NSWSC 1946, Black J at [4]. 4. The powers of a liquidator appointed pursuant to a creditors' voluntary winding up, as opposed to a members' voluntary winding up, do not differ significantly from those of a court-appointed liquidator: Pendonna, Brereton J at [4]; U-Nited Warranties, Black J at [4]; Halal Meats, Black J at [5]. In such a case, it may well require less to establish that it will be in the interests of the creditors that the voluntary winding up proceed, rather than the company be wound up compulsorily: Re Camarda and Cantrill Pty Ltd [2015] NSWSC 2067, Brereton J at [7]. In the case of a members' voluntary winding up, it will often be difficult to show that the interests of the creditors are promoted by a voluntary winding up, because in the context of a members' winding up, a liquidator does not have the same range of powers and remedies as one in a compulsory winding up: Camarda, Brereton J at [6]. 5. The extent of the work already undertaken by the liquidator is a relevant factor because otherwise time will be lost and effort wasted if it was necessary to appoint a new liquidator: Pendonna, Brereton J at [5]. The work undertaken by the liquidator since his or her appointment is relevant because otherwise there would be a duplication of work and additional expense, which would ultimately reduce the returns to the company's creditors if the liquidator cannot remain and a different court-appointed liquidator is ultimately appointed:; U-Nited Warranties, Black J at [3]-[5]; Halal Meats, Black J at [5]. 6. It will also be relevant to consider whether the voluntary winding up has proceeded in the face of knowledge of the application for a court-ordered winding up or in ignorance of it, and if in ignorance of it, whether that has been despite all reasonable caution, or on the other hand, reckless to the possibility: Camarda, Brereton J at [9]. 7. A significant factor is whether the petitioning creditor consents to the relief which is sought because it serves to indicate a view of a creditor that its interests will at least be as well served by the voluntary winding up continuing as by the alternative of a compulsory winding up ordered by the court: Pendonna, Brereton J at [6]; U-Nited Warranties, Black J at [7]; Halal Meats, Black J at [6]. 8. Consideration should be given to whether there would be any difference between the relation-back day arising on the appointment of a court-appointed liquidator and that arising on the appointment of a liquidator pursuant to a members' voluntary winding up, and whether the liquidator has identified any potential voidable transactions which would be affected by a change in the relation-back day: Pendonna, Brereton J at [5]; U-Nited Warranties, Black J at [6]; Halal Meats, Black J at [6]. In circumstances where the earlier relation-back day may be an advantage to the creditors, an appropriate order may be made pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) of the Corporations Act in relation to the external administration of the company, that s 91 of the Corporations Act operate such that the relation-back day be fixed at the date on which the application was made for the winding up in insolvency: see, for example, orders made in McVeigh v Gogo's Food Service Pty Ltd, in the matter of Gogo's Food Service Pty Ltd [2018] FCA 936, McKerracher J; Tow.com.au, Greenwood ACJ; In the matter of ACN 060 242 515 Pty Ltd (unreported, Supreme Court of New South Wales, Black J, 15 March 2021).

CONSIDERATION

1. Applying these various principles to the facts of this case, I am satisfied that it is appropriate to make the orders sought in the present application. The matters that I have taken into account and weighed in arriving at my decision to exercise the discretion in this way are as follows: 1. There is little difference in the liquidator's powers from a creditors' voluntary winding up compared to those from a court-appointed winding up. 2. Although not substantial, Mr Beattie has already taken a significant number of important steps in carrying out the liquidation of Resicomm. A court-appointed liquidator would have to duplicate these steps. Replacing Mr Beattie with a court-appointed liquidator would result in a loss of time, a waste of the effort already expended, disruption to those parties such as ASIC, the ATO, banks, creditors and accountant who have already dealt with Mr Beattie and, most importantly in relation to the interests of creditors, additional expense. 3. Koolie as the petitioning creditor consents to the orders which are sought, indicating that its interests are met whether it be a creditors' voluntary liquidation of Resicomm or a court-ordered liquidation of Resicomm. 4. Mr Beattie has adequately explained how it is that the voluntary liquidation proceeded despite the filing of Koolie's application to the court to wind up Resicomm in insolvency. I am satisfied that this arose because the records maintained by ASIC were not kept up to date in a timely fashion, so that Mr Beattie had no way of knowing about Koolie's application until it came to his attention on 20 June 2024. Since he became aware of that fact, Mr Beattie has proceeded with this application in a timely fashion. 5. Although Mr Beattie has not yet identified any transactions which might be recoverable as voidable transactions if Resicomm was deemed to have an earlier relation-back day of 24 May 2024, for the purpose of protecting the interest of creditors, I consider it is appropriate to make an order which fixes the relation-back day at 24 May 2024.

ORDERS

1. For the reasons set out above, I propose to make the following orders: 1. Leave is granted nunc pro tunc pursuant to s 490(1)(a) of the Corporations Act 2001 (Cth) for the defendant Resicomm Electrical Pty Ltd ACN 166 443 894 to be wound up voluntarily. 2. Leave is granted pursuant to r 5.8 of the Supreme Court (Corporations) Rules 1999 (NSW), for the plaintiff's originating process filed 24 May 2024 to be discontinued. 3. Order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) of the Corporations Act, that s 91 of the Corporations Act operate such that the relation-back day be fixed at 24 May 2024. 4. Order that the plaintiff's costs of the proceedings be fixed in the sum of $10,350.30 and be payable in accordance with s 556(1)(b) of the Corporations Act as if the defendant were wound up in these proceedings.

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