Gusdote Pty Limited v North Queensland Land Development Pty Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1496 of 2010

BETWEEN: GUSDOTE PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 089 937 253

AND: NORTH QUEENSLAND LAND DEVELOPMENT PTY LIMITED (IN LIQUIDATION) ACN 125 265 358

JUDGE: EMMETT J DATE: 15 JUNE 2012 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This proceeding arises out of orders made by Cowdroy J on 11 June 2010 in proceeding NSD 935 of 2009 (see Demetriou v Gusdote Pty Limited [2010] FCA 581). On 28 March 2012, I published reasons for my conclusions relating to the taking of accounts ordered by Cowdroy J (see Gusdote Pty Limited v North Queensland Land Development Pty Limited (No 3) [2012] FCA 280). Following the publication of my reasons on 28 March 2012, orders were made on 20 April 2012 to give effect to the conclusions that I had reached. One of those orders was that there be judgment for Gusdote Pty Limited (Gusdote) against North Queensland Land Development Pty Limited (in liquidation) (North Queensland) for the amount of $3 million. I also ordered that North Queensland transfer to Gusdote legal title to land described as the Willow Golf Course Land. 2 As I indicated in my reasons, the latter order constitutes something of a Pyrrhic victory for Gusdote, insofar as there is very little equity left in the land. That is because of mortgages granted by North Queensland to secure advances made to other parties. That is to say, although North Queensland had title to the land that was the subject of the mortgages, there is every reason to conclude that North Queensland did not receive any benefit from the advances made on the security of those mortgages. That has led Gusdote to make a further interlocutory application, dated 1 June 2012, for the appointment of an additional liquidator of North Queensland to pursue possible claims for relief under s 588FF of the Corporations Act 2001 (Cth) (the Corporations Act) in respect of the mortgages. 3 Where, on the application of a company's liquidator, the Court is satisfied that a transaction of the company is voidable because of s 588FE, the Court may make one or more of the orders set out in s 588FF of the Corporations Act. Section 588FE provides that, if a company is being wound up, a transaction of the company may be voidable because of one or more of s 588FE(2) to s 588FE(6). Those provisions contemplate that a transaction might be voidable if it is an uncommercial transaction of the company. There is a basis for concluding that there is at least a reasonably arguable case that the mortgages to which I have referred were uncommercial transactions of North Queensland. 4 It is clear enough that the present liquidators of North Queensland have power to commence and prosecute a proceeding under s 588FF. However, there is a long history of disputes between Gusdote, on the one hand, and the liquidators of North Queensland, on the other, to which reference was made in my reasons of 28 March 2012 and in earlier reasons given in this proceeding (see Gusdote Pty Limited v North Queensland Land Development Pty Limited (No 2) [2011] FCA 608 and Gusdote Pty Limited v North Queensland Land Development Pty Limited [2011] FCA 202). Having regard to that history, Gusdote takes the view that it would be preferable that an independent liquidator be appointed for the purposes of conducting any such claim under s 588FF against the mortgagees of the land. The present liquidators do not oppose that course and, in the circumstances, having regard to the antagonism that has developed between Gusdote and the present liquidators, I consider that it is desirable that the latter not have the carriage of such a proceeding. The question, however, is whether the Court has power to make the orders now sought by Gusdote. 5 North Queensland is in liquidation by the operation of s 446A of the Corporations Act. Under s 446A(1), that section applies if the creditors of a company under administration resolve under s 439C(c) that the company be wound up. Under s 446A(2), the company is taken to have passed a special resolution that the company be wound up voluntarily and to have done so without a declaration of solvency having been made under s 494. Thus, while the winding up of North Queensland is taken to be a creditors' voluntary winding up, it is nevertheless a winding up in insolvency. 6 The present application is brought under ss 511, 472 and 473 of the Corporations Act. Section 511 relevantly provides that a creditor may apply to the Court to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court. Section 511 is to be found in Division 4 of Part 5.5, which deals with voluntary winding up generally. In the light of the orders that were made on 20 April 2012, Gusdote is a creditor of North Queensland. Accordingly, it has standing to apply under s 511. Under s 472(1), on an order being made for the winding up of a company, the Court may appoint an official liquidator to be liquidator of the company. Under s 473(8), if more than one liquidator is appointed by the Court, the Court must declare whether anything that is required or authorised by the Corporations Act to be done by the liquidator is to be done by all or any one or more of the persons appointed. However, there is some doubt as to how s 473(8) applies in the present circumstances. 7 It is clear that, if the Court appoints more than one liquidator, s 473(8) would require the Court to declare whether anything that is required or authorised to be done is to be done by one of the liquidators to the exclusion of others. In the present case, if a further liquidator were to be appointed, that liquidator would be the only liquidator appointed by the Court. The question is whether s 511 has sufficient operation to deem s 473(8) to apply as though the present liquidators had been appointed by the Court. It seems clear enough that, where the Court has appointed liquidators or a liquidator, the Court has the power to appoint an additional liquidator at a subsequent time, and to limit the respective powers of the original liquidator and the subsequent liquidator. 8 In construing provisions such as s 511, a liberal construction should be given to facilitate the efficient and economical administration and winding up of companies. While, as I have said, the matter is not entirely without doubt, I am disposed to conclude that the effect of s 511 is that the Court should approach an order under s 511 on the assumption that the liquidator of a company in a voluntary winding up is to be regarded as having been appointed by the Court for the purposes of the operation of a provision such as 473(8). In any event, a liquidator appointed by the Court would be an officer of the Court, and the Court's inherent jurisdiction would extend to conferring specific powers on a liquidator appointed under s 511. 9 Alternatively, s 447A might be called in aid. Section 447A provides that the Court may make such orders as it thinks appropriate about how Part 5.3A of the Corporations Act is to operate in relation to a particular company. Part 5.3A is concerned with the administration of a company's affairs with a view to executing a deed of company arrangement. It is under provisions within Part 5.3A that the present liquidators were appointed to North Queensland. It would be appropriate to order, under s 447A, that s 446A(2), which is in Part 5.3A, be taken to operate to provide that the present liquidators are to taken to have been appointed by the Court. 10 I am satisfied that it is appropriate that a further liquidator should be appointed for the purposes of conducting the proposed litigation under s 588FF. Mr David Ross, an official liquidator, has consented to be appointed. The appropriate order would be that he be appointed as a liquidator of North Queensland. The Court would then make appropriate declarations, under the provisions to which I have referred, to the effect that Mr Ross's powers be limited to bringing or causing North Queensland to bring such proceedings as he may be advised against the mortgagees to have the relevant mortgages set aside, or to seek such other relief as may be appropriate. The Court would also make a declaration that the present liquidators have no authority, function, role or responsibility for the conduct of such proceedings. I propose to make orders along those lines. 11 It is proposed that Mr Ross would have no right to remuneration and no right of indemnity out of the assets of North Queensland, beyond the assets that might be recovered as a result of any such proceeding, in respect of costs and expenses that may be incurred in the exercise of the powers that are to be conferred upon him. I assume that Gusdote, as a creditor of North Queensland, would otherwise provide for the costs and expenses of the proposed litigation. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.