Hutchins, in the matter of Ardenberg Pty Ltd (in liq) (Administrators Appointed) FCA [2018] 1586

Federal Court of Australia|2018-08-13|Before: Mr J, Markovic J

MARKOVIC J DATE OF ORDER: 13 August 2018

THE COURT ORDERS THAT:

The first defendant/applicant on the interlocutory application file and serve an affidavit of Paul Lawrence Robson in the form lodged on 13 August 2018 properly sworn by 4.00 pm eastern standard time on 14 August 2018.
The first defendant's interlocutory application filed on 13 August 2018 be dismissed.
The first defendant pay the first and second plaintiffs' costs of the interlocutory application filed on 13 August 2018. THE COURT NOTES THAT:
The applicant on the interlocutory application relies on the affidavit of Paul Lawrence Robson and the annexures thereto but the copy of that affidavit which was lodged on 13 August 2018 has not been properly sworn. The respondents on the interlocutory application do not object to the applicant relying on the content of that affidavit as an outline of Mr Robson's evidence. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background 5 Mr Robson is the sole director of Ardenberg as well as a contributory and creditor. 6 Ardenberg's principal business was acting as a corporate trustee of the RB Trust of which Mr Robson was a beneficiary. The principal assets of the RB Trust are: Hannan's Foodmart IGA, a supermarket located in Kalgoorlie, Western Australia (Supermarket); a property located at 18 Maritana Street, Piccadily, Western Australia from which the Supermarket operates (Maritana Street Property); and a property located at 102 Brookman Street, Kalgoorlie, Western Australia (Brookman Street Property).

Appointment of administrators to Ardenberg 7 In September 2014 the Deputy Commissioner of Taxation filed an application to wind up Ardenberg pursuant to s 459P of the Act. 8 On 29 October 2014 Mark Raymond Hutchins, Bruno Anthony Robert Secatore and Jason Bing-Fai Tang were appointed as voluntary administrators of Ardenberg (Administrators). 9 Shortly after the Administrators were appointed, Mr Robson became aware that for a substantial period the Supermarket had been overcharged a total of approximately $1.5 million by a bread supplier for bread that was being delivered to another store. Ardenberg's claim was subsequently settled by the Administrators on a confidential basis but, according to Mr Robson, for a sum which was less than the amount owed.

Deed of company arrangement executed 10 On 29 May 2015 Ardenberg entered into a deed of company arrangement (DOCA) pursuant to the terms of which, among other things, a cash contribution, forming part of the Deed Fund (as defined in the DOCA), was to be paid in 12 equal monthly instalments and Ardenberg was required to pay all taxes and statutory obligations due for payment after the execution of the DOCA. The Administrators were appointed deed administrators under the DOCA (Deed Administrators). 11 On or about 3 May 2016 there was a Default Event (as defined in the DOCA) which, among other things, concerned the failure of Mr Robson to provide a cash contribution required by cl 4 of the DOCA as referred to in the preceding paragraph. On 28 June 2016 the Deed Administrators exercised their rights pursuant to cl 13.2(b) of the DOCA to enter into possession of Ardenberg's assets. 12 On or about 16 December 2016 Ardenberg entered into a deed of variation of the DOCA and control of Ardenberg reverted to Mr Robson. 13 On or about 8 August 2017, a further Default Event occurred under the DOCA concerning, among other things, the payment of post DOCA taxation and superannuation liabilities. As a result of this default, on 7 March 2018 the Deed Administrators exercised their right to terminate the DOCA and appoint themselves as the Liquidators of Ardenberg.

Events following the appointment of the Liquidators 14 On 16 March 2018 Justice Foster relevantly made orders pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) that the Liquidators be jointly and severally appointed as receivers and managers over the property, assets and undertakings of the RB Trust (March Orders). 15 Following their appointment as receivers, the Liquidators have, among other things: (1) conducted a sales and marketing campaign in relation to the sale of the Brookman Street Property, the Maritana Street Property and the Supermarket business; (2) on 8 May 2018 conducted an unsuccessful public auction for sale of the Brookman Street Property and conducted subsequent negotiations with interested parties; (3) negotiated with parties interested in buying the Maritana Street Property and the Supermarket business; (4) subsequently accepted offers for the purchase of the Supermarket business and for the purchase of the Brookman Street Property; and (5) obtained the consent of the ANZ to the sale of the Supermarket business and the sale of the Brookman Street Property. 16 On 11 August 2018, Mr Tang, one of the Liquidators and receivers and managers appointed by the Court, had a telephone conversation with Jim Goodwin, a director of GMO, the agent appointed to sell the Supermarket business. During that conversation, Mr Tang informed Mr Goodwin of the orders being sought by Mr Robson. In response Mr Goodwin said words to the following effect: Time is of the essence and any delay will put the transaction at risk. If we are not in a position to exchange contracts by Wednesday, the purchasers may not proceed. 17 Following his conversation referred to in the preceding paragraph, on 11 August 2018 Mr Tang received an email from Mr Goodwin in which Mr Goodwin said: Referring to our conversation this morning Time is absolutely of the essence with the purchasers of Hannan's IGA any further Delay will be of great risk to the transaction. In summary if we don't have an agreed contract by close of business on Wednesday this coming week the purchasers may not continue with the transaction. 18 As at 13 August 2018 exchange of the contract for the sale of the Brookman Street Property was said to be imminent. 19 Mr Tang said that, in the opinion of the receivers, the orders sought by Mr Robson for a stay of the liquidation and the receivership for 14 days should not be made by the Court because: (1) if granted, the relief may adversely impact the sale of the Supermarket business and the Brookman Street Property in circumstances where exchange of contracts for those sales is imminent; (2) in the event that the parties interested in purchasing the Supermarket business and the Brookman Street Property are no longer prepared to exchange contracts after 14 days, there would be further delay to the realisation timetable; and (3) since 16 March 2018 Mr Robson had had significant time and opportunity to secure sufficient funding and undertake such other steps necessary to terminate the liquidation and the receivership but has not had any success to date. Mr Robson had not identified the basis upon which this latest attempt at funding would be sufficient to pay all existing creditors of Ardenberg and the RB Trust as well as the costs of the liquidation and the receivership.

Mr Robson's attempts to refinance 20 Mr Robson gave evidence that since December 2016 he had attempted to bring the administration to an end by considering refinancing options. In May 2018 Mr Robson's solicitors met with representatives of the ANZ to discuss a proposal to be put to the Liquidators and, according to Mr Robson, he continued to make efforts to obtain finance and negotiated with the Liquidators. Mr Robson is of the opinion that the continued operation of the Supermarket business is critical to the successful refinancing of the Ardenberg as it is from the proceeds of that business that all loans could be serviced. 21 On 7 August 2018 Mr Robson participated in a without prejudice telephone conference call with representatives of the Liquidators, the ANZ, Bob Jacobs, who Mr Robson described as an "experienced turnaround practitioner", and his solicitors. Following that conference call Mr Robson was informed that the Supermarket business was about to be sold by the Liquidators. He said that if the sale went through finance would be impossible as the Supermarket is the primary source of income for Ardenberg. Mr Robson understood that the Liquidators would not be exchanging contracts for sale of the Supermarket business before 14 August 2018. 22 Mr Robson said that he was in the "final stages of negotiating finance" through Mr Jacobs and that Mr Jacobs had informed his lawyers that he had received confirmation that a terms sheet for the financing would "be available on Tuesday". Mr Robson anticipated that financing approval could be given by the end of August 2018. A copy of an email from Mr Jacobs to Mr Robson's solicitors dated 10 August 2018 provided: I have now spoken to the financiers and he is contemplating a term sheet to be provided to ANZ and Paul Robson by Tuesday next week. 23 Mr Robson believed, based on the matters set out in the preceding paragraph, that it was possible for him to refinance Ardenberg and return it to solvency.

The position of ANZ 24 An email dated 13 August 2018 from Richard Johnson of HWL Ebsworth, the solicitors for ANZ, to the solicitor for the Liquidators was in evidence before me. In his email Mr Johnson relevantly said: My client has not been served with Mr Robson, nor has it had an opportunity to fully consider the materials that you have kindly provided. In the circumstances, it is fair to say that my client is concerned to ensure that its debt is repaid as soon as possible and that any risks or impediments to the achievement of that objective are mitigated or avoided to the extent possible. My client has not had sufficient opportunity to consider the merits or the difficulties associated with Mr Robson's application and is therefore content to abide the Court's order, save to say that: • my client would expect that the Court will require security, funds paid into Court or a supported undertaking as to damages as a precondition to any relief of the sort sought by Mr Robson being granted; and • my client reserves all of its rights including its right to enforce the various securities that it holds. For the avoidance of any doubt, my client has not agreed to Mr Robson's application or agreed to forbear from exercising its rights. My client's rights are reserved in all respects.

The Liquidators' fees 25 Mr Robson also gave evidence about the liquidators' fees who he described as "a significant creditor" of Ardenberg. In Mr Robson's opinion, the Liquidators have charged fees "way above what is fair and reasonable" and "well beyond what [he] expected to be charged to deal with what was a relatively straight forward issue". 26 Mr Robson noted that, despite having offices in Perth, the Liquidators had chosen to operate out of their Sydney office and therefore incurred unnecessary expenses for Ardenberg. He said he also had other complaints about the fees charged by the Liquidators but they were best dealt with at a later date. He noted that a significant proportion of the fees charged by the Liquidators to date are yet to be approved by the Court and are likely to be the subject of objection.

Legal Principles 27 Section 482(1) of the Act provides that: (1) At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order. 28 Relevantly, an application under s 482(1) of the Act can be made by a creditor or a contributory of the company: s 482(1A) of the Act. 29 Section 513 of the Act provides: Except so far as the contrary intention appears, the provisions of this Act about winding up apply in relation to the winding up of a company whether in insolvency, by the Court or voluntarily. 30 In Re Warbler Pty Ltd (1982) 6 ACLR 526; (1982) 1 ACLC 323 at 533 (Re Warbler) Master Lee listed, non-exhaustively, principles to be considered on an application for a stay under s 482 of the Act: 1. The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: Re Calgary & Edmonton Land Co Ltd (in liq) [1975] 1 WLR 355 at 358-9 per Megarry J. See also s 243 of the Act. 2. There must be service of notice of the application for a stay on all creditors and contributories, and proof of this: Re South Barrule Slate Quarry Co (1869) LR 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113. 3. The nature and extent of the creditors must be shown, and whether or not all debts have been discharged: Krextile Holdings Pty Ltd v Widdows, supra Re Data Homes Pty Ltd, supra. 4. The attitude of creditors, contributories and the liquidator is a relevant consideration: s 243(1), Re Calgary & Edmonton Land Co Ltd (in liq), supra. 5. The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding up is sought: Re a Private Company [1935] NZLR 120; Re Mascot Home Furnishers Pty Ltd [1970] VR 593 at 598. 6. If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd, supra. 7. The general background and circumstances which led to the winding up order should be explained: Krextile Holdings Pty Ltd v Widdows, supra. 8. The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to "commercial morality" or the "public interest": Krextile Holdings Pty Ltd v Widdows, supra; Re Data Homes Pty Ltd, supra. 31 After referring to the principles set out in Re Warbler, Black J in Re 311 Hume Highway Liverpool Fund Pty Ltd (in liq) (2013) 93 ACSR 683; [2013] NSWSC 465 said at [5] and [7]: [5] Relevant factors to such an application were identified in Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70; 157 FLR 107; [2000] NSWSC 756; Re Nardell Coal Corporation Pty Ltd (2004) 49 ACSR 110; [2004] NSWSC 281 and summarised by Austin J in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd (2006) 57 ACSR 103; [2006] NSWSC 292 at [17] as including the interests of the company's creditors, including future creditors; the interests of the liquidator, particularly with regard to costs; the interests of contributories and the interests of "the public", including the public interest in matters of commercial morality, and the public interest that insolvent companies should be wound up. Generally, the court will not terminate a winding up so as to restore control of a company to its shareholders and directors unless the company will have additional financial strength and stability to provide confidence that it can continue without an appreciable risk of returning to liquidation: Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22 at 27; Leveraged Equities Ltd v Hilldale Australia Pty Ltd (2008) 26 ACLC 182; [2008] NSWSC 190; Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797 (SNL Group). … [7] The importance of proof, preferably including accounting evidence, as to the company's financial position was emphasised by White J in QBE Workers Compensation Pty Ltd v P Russell Enterprises Pty Ltd [2005] NSWSC 1128 at [26], where his Honour observed that the court was unlikely to be persuaded of a company's solvency on the evidence of a single director/shareholder without external confirmation, typically obtained either from the liquidator or from the evidence of an external accountant. That observation was approved by Barrett J in Owners Strata Plan 70294 v LNL Global Enterprises Pty Ltd (2006) 60 ACSR 646; [2006] NSWSC 1386 at [4] (Owners Strata). In Expile Pty Ltd v Jabb's Excavations Pty Ltd (2003) 45 ACSR 711; [2003] NSWCA 163, the Court of Appeal emphasised that a party seeking to establish solvency must lead the "fullest and best" evidence of the company's financial position and, in Owners Strata above, Barrett J observed (at [5]) that the same principle applied where an applicant sought to show that solvency would be achieved if a particular course of conduct was followed. 32 In In the matter of Wine National Pty Ltd, James Estate Wines Pty Ltd, Liquor National Pty Ltd [2014] NSWSC 507 (Wine National) at [11]-[13] and [16] Black J said: [11] Section 482 of the Corporations Act provides that at any time during the winding up of a company, the Court may, on application, make an order, relevantly, staying the winding up either indefinitely or for a limited time. It is common ground that the jurisdiction under s 482 of the Corporations Act does not apply directly to a company that is being wound up voluntarily; however, by s 511 of the Corporations Act, the Court may exercise any power in a voluntary winding up which it could exercise if the company was wound up by the Court, including the power to stay or terminate the winding up. Standing to make the relevant application is conferred on the liquidator, creditor or contributory under s 482(1A). … [12] The order that the Applicants seek was framed as an "interim" order staying the winding up. It does not seem to me that s 482 of the Corporations Act authorises the Court to take an "interim" step falling short of a stay of a winding up, which is itself an order that is interim in character. In Austral Brick Co Pty Ltd v Falgat Constructions Pty Ltd (1990) 21 NSWLR 389 at 392; (1990) 2 ACSR 766, Young J (as his Honour then was) distinguished the usual meaning of the word "stay" from the concept of a stay of a winding up order, noting that such a stay "temporarily or indefinitely removed" any limitation upon the company's normal activities and permitted the directors "once again to implement their powers". The effect of a stay of a winding up was described by Hodgson CJ in Eq (as his Honour then was) in Amann Aviation Pty Ltd v Continental Venture Capital Ltd [1999] NSWSC 1212 at [41] as follows: … a stay of a winding up order has the effect that the winding up order is itself deprived of continuing effect, so that the appointment of the liquidator is no longer sustained and control of the company returns to the directors: see Austral Brick Co Pty Ltd v Falgat Constructions Pty Ltd (1990) 21 NSWLR 389. [13] In oral submissions, Mr Allen initially approached the application on the basis that the Court would apply the tests applicable to the grant of interlocutory relief, namely, whether there was an arguable case on the balance of convenience, but ultimately accepted that the Court may apply the usual discretionary considerations applicable to a stay of a winding up, but on the basis that such a stay was temporary in character. It does not seem to me that the question whether the winding up should be stayed is to be determined by reference to principles of whether there is a "serious question to be tried" or the "balance of convenience", since a stay of the winding up does not preserve the status quo, but instead restores powers of the directors which are suspended during the winding up, and removes, albeit potentially on a temporary basis, the liquidator from control of the company. In that sense, a stay of a winding up seems to me to be in the nature of final relief, although it may be temporary in character. … [16] A stay or termination of a winding up will only be ordered if there is some valid reason why it is appropriate to make that order rather than permit the winding up to takes its normal course: El-Fahkri, in the matter of Elfah Pty Ltd (in liq) [2002] FCA 1469 at [9].

Mr Robson's submissions 33 Mr Robson submitted that a number of the matters enunciated in Re Warbler do not apply to a temporary stay application where the stay is not seeking to bring the company out of liquidation for a lengthy period. He further submitted that in those circumstances the real consideration for the Court is the effect of the stay on interested parties, namely the creditors. According to Mr Robson, this is because Re Warbler makes clear that the circumstances of the winding up order are particularly important. Mr Robson submitted that in the case of Ardenberg, for a significant period prior to the appointment of the Administrators, it was being charged for bread products that were being supplied to another supermarket. 34 Mr Robson submitted that any concerns which arise because the effect of the stay would be to return control of the company to Mr Robson and to take it out of the control of the Liquidators could be dealt with by making the order on appropriate undertakings from Mr Robson to the effect that, during the period of the stay, Mr Robson would not deal with any assets of the RB Trust or Ardenberg. 35 Mr Robson submitted that the stay would allow him a short amount of time in which he could put together a proposal to terminate the winding up that could be brought before the Court for approval. 36 In terms of service of the application on interested parties, Mr Robson noted that in the time available only the ANZ, the contributory of Ardenberg (i.e. Mr Robson) and the Liquidators had been given notice of the Interlocutory Application. Mr Robson had not, in the time available, served any other creditor with his Interlocutory Application nor had he notified the other primary beneficiary of the RB Trust, Mr Robson's former wife, Vicki Robson, of the application. Mr Robson submitted that, if the stay was granted, in that 14 day period a "full" application for termination of the winding up would be made and served on all parties, that is, all creditors and Ms Robson. 37 Mr Robson submitted that, because the sales contracts and related documents are commercially sensitive and not before the Court, it is impossible for the Court to assess whether the sale prices are fair and whether the proposed sales would result in a better outcome for the creditors generally as compared with a successful arrangement made with the Court's approval to terminate the winding up. Mr Robson further submitted that the evidence relied on by the Liquidators did not go as high as to suggest that it was "likely" or that there was a "significant danger" that the Liquidators may lose the sale if they did not exchange contracts as planned.

consideration 38 The effect of the application made by Mr Robson, if successful, would be to return control of Ardenberg to him as its director. Mr Robson submitted that in the circumstances of his Interlocutory Application, the Court would not apply the established principles but would make a determination based on the application of some lesser standards or an unidentified subset of the principles identified in Re Warbler. Mr Robson was unable to take me to any authority in support of that proposition and, in light of the authorities referred to above and in particular, the decision of Black J in Wine National, with which I respectfully agree, I do not accept Mr Robson's submission. 39 The granting of a stay is a discretionary matter and there is an onus on the applicant, in this case Mr Robson, to make out a positive case for a stay. Mr Robson failed to satisfy me that there was a proper basis upon which the Court could order a stay of the winding up or the receivership for the 14 day period sought by him or for any other period. My reasons for reaching that conclusion follow. 40 First, Mr Robson had not served notice of his application on all creditors and contributories. The only creditor who had received a copy of the application was the ANZ. Its attitude to the application is set out at [24] above. Mr Robson's failure to serve the application on all creditors, the people and entities who would be most affected by Mr Robson's application, was a significant matter telling against the granting of Mr Robson's application. Those parties had a right to be heard on the application, the result of which would be to return the assets of the RB Trust and Ardenberg to Mr Robson as director. 41 Secondly, the nature of Mr Robson's refinancing proposal was not known or in evidence before me. The only evidence that was before the Court suggested that Mr Robson was in the final stages of negotiating finance and that a terms sheet for the finance would be available on "Tuesday", which was the day after Mr Robson made this application. Essential terms such as the quantum of the proposed finance, the conditions attaching to it and its timing were not in evidence before the Court. In those circumstances it was impossible to assess whether or not all debts would be discharged. 42 Further, on Mr Robson's own evidence he had had a significant time in which to investigate and negotiate a refinancing proposal. The Liquidators submitted that Mr Robson had been attempting to negotiate a refinancing proposal since 16 March 2018 without any success and that Mr Robson had failed to identify the basis upon which his latest attempt at financing would be sufficient to pay all existing creditors of Ardenberg and the RB Trust, the costs of the liquidation and the receivership. I accepted that submission. 43 Thirdly, as I have already observed, with the exception of the ANZ, the attitude of the creditors was unknown. Similarly, the attitude of the second primary beneficiary of the trust, Ms Robson, was unknown. Finally, the attitude of the Liquidators and receivers is a relevant consideration. Their attitude is set out at [19] above. In short, they do not support the application. 44 Fifthly, based on the Liquidators' submissions, I accepted that Ardenberg was insolvent. 45 Sixthly, contrary to Mr Robson's submission, the general background and circumstances which led to the liquidation of Ardenberg was not a factor which weighed heavily in his favour on the application. As submitted by the Liquidators, Ardenberg's overpayment of some $1.5 million to a supplier, which seems to have partially triggered it going into voluntary administration, was not identified by the management of Ardenberg (i.e. Mr Robson) prior to its administration.

Conclusion 46 For those reasons I dismissed Mr Robson's Interlocutory Application. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.

SCHEDULE OF PARTIES NSD 382 of 2018 Defendants Fourth Defendant: METCASH TRADING LIMITED ACN 000 031 569 Fifth Defendant: AUSTRALIAN LIQUOR MARKETERS PTY LTD ACN 002 885 645 Sixth Defendant: AUSTRALIAN LIQUOR MARKETERS (QLD) PTY LTD ACN 010 756 519 Seventh Defendant: AUSTRALIAN LIQUOR MARKETERS (WA) PTY LTD ACN 009 196 614 Eighth Defendant: IGA DISTRIBUTION (SA) PTY LTD ACN 008 193 155 Ninth Defendant: IGA DISTRIBUTION (VIC) PTY LTD ACN 006 509 280 Tenth Defendant: IGA DISTRIBUTION (WA) PTY LTD ACN 008 667 650 Eleventh Defendant: M-C INTERNATIONAL AUSTRALIA PTY LTD ACN 080 064 099 Twelfth Defendant: INDEPENDENT SOLUTIONS PTY LTD ACN 078 247 873 Thirteenth Defendant: METCASH FOOD & GROCERY PTY LTD ACN 004 391 422 Fourteenth Defendant: METCASH FOOD & GROCERY CONVENIENCE DIVISION PTY LTD ACN 000 226 399 Fifteenth Defendant: MONDE NISSIN (AUSTRALIA) PTY LTD ACN 169 518 325 Sixteenth Defendant: NATIONAL-OILWELL PTY LTD ACN 010 717 398 Seventeenth Defendant: CARDTRONICS AUSTRALASIA PTY LTD ACN 097 550 519 Eighteenth Defendant: WORLD BRAND IMPORTERS PTY LTD ACN 618 824 043

Corporations Act 2001(Cth)ss 482, 513

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