Hayes v Spyrou, in the matter of Company Company Pty Ltd

1. Pursuant to s 459P of the Corporations Act 2001 (Cth), Company Company Pty Ltd (In Liquidation) ACN 002 645 203 be wound up in insolvency.
2. Alan John Hayes be appointed as liquidator of Company Company Pty Ltd (In Liquidation) ACN 002 645 203.
3. Pursuant to s 467(3)(b) of the Corporations Act 2001 (Cth), the Court dispenses with the requirements of ss 465A, 470(2)(b) and 470(2)(c) of the Corporations Act 2001 (Cth) and r 5.6(1) of the Federal Court (Corporations) Rules 2000 (Cth).
4. The costs of the interim relief are to be costs of the proceedings. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

FARRELL J 1 The applicant, Mr Hayes, has been the liquidator of Company Company Pty Ltd (in liq) ACN 002 645 203 (Company) since 1 July 2015, when it was wound up pursuant to a special resolution of its members under s 491 of the Corporations Act 2001 (Cth). The defendant, Mr Spyrou, was the director and secretary of the Company at that time and continued to hold those offices at the time of this application. 2 By an originating process filed on 29 June 2018, Mr Hayes sought an order that the Company be would up in insolvency pursuant to s 459P of the Corporations Act on an interlocutory basis and the following final relief: (1) Orders pursuant to s 588FJ of the Corporations Act that the circulating security interest created pursuant to a general security deed entered into by the Company with the first respondent George Spyrou be declared void as against Mr Hayes as the Company's liquidator except so far as it secures advances paid to the Company by Mr Spyrou at or after 13 March 2015. (2) Declarations that the general security deed and a deed of assignment dated 19 June 2015 pursuant to which the Company assigned to Mr Spyrou the company's debtors are uncommercial transactions, unfair preferences, unreasonable director-related transactions, insolvent transactions and voidable. (3) Orders pursuant to s 588FF of the Corporations Act that Mr Spyrou account to Mr Hayes for all proceeds of, and pay to him any sum received, pursuant to the general security deed and debtors assigned pursuant to the deed of assignment. 3 The interlocutory relief was necessitated by the fact that s 588FJ applies only where the company is being wound up in insolvency. 4 The originating process was amended on 7 August 2018 to seek interlocutory orders that: (1) The Company be wound up in insolvency pursuant to s 459P of the Corporations Act; (2) Mr Hayes be appointed as liquidator of the Company; and (3) Consequential orders dispensing with the requirements of ss 465A, 470(2)(b) and 470(2)(c) of the Corporations Act and r 5.6(1) of the Federal Court (Corporations) Rules 2000 (Cth). 5 In support of the interlocutory process, Mr Hayes filed comprehensive submissions dated 5 October 2018 dealing with the background to the application, the evidence and applicable principles relevant to the grant of relief he seeks. Those submissions are set out in the annexure to these reasons. I accept the submissions and see no utility in replicating them in the body of the judgment. 6 The affidavits referred to in the submissions were read at the hearing on 12 October 2018 together with a further affidavit of Courtney Jane Macdade affirmed on 11 October 2018 in relation to a notice of the application for winding up orders dated 3 October 2018 published on the Australian Securities and Investments Commission's website. 7 I note that: (1) Creditors have received notice of the interlocutory process and no one appeared to oppose the application. (2) Mr Spyrou, the defendant in the application for final relief, does not oppose interlocutory relief being granted. His legal representative, Mr Hur, appeared at the hearing and confirmed that matter. (3) Paul Russell, a chartered accountant and formerly an official liquidator (until May 2017), has provided a report dated 6 September 2018. Its findings are summarised at [20] of the submissions and I am satisfied that the Company is now, and was at the date of the application for winding up in insolvency, insolvent in the sense that it is unable to pay its debts as and when they fall due from its own resources or from borrowings from third parties. It also appears to have been insolvent at the relation back date of 1 July 2015 although it is unnecessary for me to make that finding at this stage. 8 Having regard to those matters, the evidence and the case law referred to in the submissions, I was satisfied that Mr Hayes has standing to seek the interlocutory orders in the amended originating process and that it was appropriate to make those orders. 9 At the hearing, I raised with the parties the question of whether the fact that the Company was not wound up in insolvency at the time the application for declarations and orders under ss 588FF and 588FJ was made on 29 June 2015 has any bearing on the utility of making the orders sought in the interlocutory process. While the originating process was filed within the three year limitation period prescribed by s 588FF(3) in relation to declarations and orders sought under s 588FF(1), the Court could not have made an order under s 588FJ at that time, because the Company was not then wound up in insolvency such that any security afforded by the general security deed could not be voided under that provision when the time to apply for orders under s 588FF expired on 1 July 2015. 10 The Court noted that in Walker and Maloney in the capacity as the liquidators of ZYX Learning Centres Ltd (formerly ABC Learning Centres Ltd) (recs and mgrs apptd) (in liq) v CBA Corporate Services (NSW) Pty Ltd (2012) 88 ACSR 153; [2012] FCA 328 at [63]-[64], Nicholas J made orders winding up that company in insolvency and appointing the liquidators as liquidators. His Honour declined to make an order extending time to bring proceedings under s 588FJ because the three year limitation period in s 588FF(3) does not apply to s 588FJ, although his Honour did make orders extending the limitation period in s 558FF(3). An appeal from that decision was dismissed: see CBA Corporate Services (NSW) Pty Ltd v Walker and Maloney in the capacity as the liquidators of ZYX Learning Centres Ltd (formerly ABC Learning Centres Ltd) (recs and mgrs apptd) (in liq) (2013) 95 ACSR 135; [2013] FCAFC 74. I note that in contrast to this case, in ZYX Learning Centres the order that the company be would up in insolvency was made before the period in which to seek orders under s 588FF had expired, so that the secured status of any creditor was capable of being impugned under s 588FJ at all relevant times. 11 Mr Rose submitted, and I accepted, that if the fact that the Company was not wound up in insolvency at the time the originating process was filed on 29 June 2015 and when the time to make applications for orders under s 588FF expired on 1 July 2015 does have a bearing on the availability of the final orders sought, it is a matter to be addressed at the time of the resolution of the application for final relief and should not prevent the Court from making the orders sought in the interlocutory process. Mr Hur did not demur from that course. 12 Accordingly, the Court made the orders sought on the interlocutory process and the orders to which the parties consented in relation to the further conduct of the application for final relief. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.