Application for adjournment of winding up application
A Murray & Sons Pty Ltd ("A Murray & Sons") sought an order for the winding up of the Defendant, Denham Constructions Pty Ltd ("Denham") on the grounds of insolvency, in its capacity as a substituted creditor, having been substituted for an earlier applicant for the winding up. I referred to the history of the proceedings in my oral ex tempore judgment delivered on 17 August 2016 ("Earlier Judgment") and I will not repeat that history. As I noted in the Earlier Judgment, on the day before the winding up application was listed before me, and following the delivery of a judgment by another judge of the Court in proceedings brought between Hakea Holdings Pty Ltd and Denham, a secured creditor of Denham, 5G Capital SPV27 Pty Ltd ("5G Capital") appointed Messrs Albarran and Ingram as administrators of Denham pursuant to s 436C of the Corporations Act 2001 (Cth). I referred to the structure of that section in my Earlier Judgment and I again need not repeat that matter.
On 17 August 2016 I made an order adjourning the winding up application to today for the purposes of allowing the administrators a further opportunity to investigate the affairs of Denham and to investigate the possibility, which had then been foreshadowed, that a deed of company arrangement would be proposed by 5G Capital, as has, in fact, occurred. The administrators, who are represented by Mr Katekar in the application, now seek a further adjournment of the winding up application for three weeks to a date after 20 September 2016. While that application is put on the basis that the administrators seek to further investigate the position, and to negotiate a deed of company arrangement which may then be put to the second creditors' meeting, Mr Katekar fairly recognises that, the practical effect of the adjournment which is sought is that the winding up application would then not be determined, if creditors at a second meeting of creditors voted, to the extent that they were admitted to vote, in favour of the proposed deed of company arrangement. Conversely, I should recognise the effect of the position taken by A Murray & Sons and a number of intervening parties in this application as having the consequence that, if the winding up application is not adjourned and is determined today in a manner that will bring about the winding up of Denham, then creditors would be deprived of the opportunity that would otherwise be available to them to vote in favour of a deed of company arrangement at that second meeting of creditors.
Plainly, there are competing policy issues raised by each of those outcomes, which are to be addressed by reference to s 440A(2) of the Corporations Act which establishes the statutory jurisdiction of the Court to adjourn a winding up application in these circumstances. That section relevantly provides that:
"The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up."
I should pause to note several matters as to that section. First, it requires the court to reach a state of satisfaction as to the specified matter at a particular point in time. Second, the court is to have regard to the interests of the company's creditors. Third, the question to which the court is to have regard is whether it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. The operation of that section has been considered in several authorities, to which Counsel referred when the matter was listed before me on 17 August 2016 but rightly did not need to further address today. I reviewed those authorities in the Earlier Judgment and do not need to repeat that review here. Broadly, the question for the court is whether it is satisfied of the matters specified in s 440A(2) of the Corporations Act on the basis that there is a sufficient possibility, and not mere speculation, that creditors' interests will be advantaged by the adjournment of the winding up application: Creevey v Deputy Commissioner of Taxation (1996) 19 ACSR 456. The circumstances in which that question is to be determined will vary depending upon the point at which an adjournment is sought. Here, the administration is now further advanced than it was when the matter was before me on 17 August 2016, but Mr Katekar fairly points out that the administration is a relatively complex one, and the affairs of Denham are relatively complex, and plainly the administrators have not had the opportunity to address all relevant issues. That is a matter to be taken into account in determining whether, as Mr Katekar contends, there is sufficient possibility that creditors' interests will be advantaged by further adjourning the winding up application to warrant that course.
I have had the benefit of detailed written submissions from Mr Katekar and Ms Williams, who appears for A Murray & Sons. I have heard from Mr Katekar, but did not consider it necessary, given the views that I have formed, to hear orally from Ms Williams, or from a number of other legal representatives for creditors of Denham which had intervened in the application.
The administrators have also read detailed evidence in the application, to which I should briefly refer, before indicating the basis on which I have formed the view that I am not satisfied that it is in the interests of Denham's creditors that Denham should continue under administration rather than be wound up. I should also note that A Murray & Sons had foreshadowed that it would rely on numerous additional affidavits, including additional affidavits prepared by legal representatives for creditors that have intervened in the application. It ultimately elected, sensibly it seems to me, not to read those affidavits, in circumstances that the number, complexity and late service of them would have had the consequence that this application would almost inevitably have been adjourned, had those affidavits been read, so as to afford a fair opportunity to the administrators to respond to them.
Returning to the evidence on which the administrators rely, Mr Albarran sets out the history of his appointment as administrator of Denham, and sets out the work which he and his staff have undertaken since his appointment. He refers to the receipt of a signed draft proposal for a deed of company arrangement ("5G DOCA Proposal") received from the first ranking secured creditor of Denham, 5G Capital, on 24 August 2016 and annexes a copy of the 5G DOCA Proposal to his affidavit dated 29 August 2016. He also refers to events at the first meeting of creditors, although the minutes of that first meeting of creditors have not yet been prepared and are therefore not in evidence before the Court. He refers to the steps which are being taken to conduct investigations into Denham's affairs, assess and consider the merits of any proposals for a deed of company arrangement, and produce a report to creditors. I should pause to note that the only deed of company arrangement which is presently available is the 5G DOCA Proposal, and no party suggested that there was any particular likelihood that any further deed of company arrangement would be proposed by any other party, in circumstances that it appears that 5G Capital has security over Denham's assets.
Mr Albarran makes clear, and Mr Katekar's submissions properly reflected, the fact that he and Mr Ingram have not yet formed an opinion as to what is in creditors' interests. He notes that the terms of the 5G DOCA Proposal are still being negotiated, including, importantly, the amount of fees that would be payable to the administrators and deed administrators. His evidence is that, at least in his opinion having regard to his experience, it would be "appropriate" for the Court to grant an adjournment of the winding up to allow the continued assessment by the administrators of the affairs of Denham and to allow creditors the opportunity of a meeting to consider the 5G DOCA Proposal. It should be noted that, of course, the question of "appropriateness" in this context is determined by the statutory regime, which requires the court to be satisfied of a particular matter in order to adjourn the winding up application, and is not at large. The question of investigation of Denham's affairs is also, it seems to me, a neutral factor so far as such an investigation can equally be performed by administrators or liquidators appointed to Denham, and the real question is whether the 5G DOCA Proposal, and any prospective improvements to it, are such as to warrant Denham remaining in administration rather than being wound up, at this point.
Mr Albarran's affidavit annexes the 5G DOCA Proposal and also, helpfully, contains a preliminary report prepared by his firm, to assist the Court in assessing that proposal. I should acknowledge the helpfulness of that approach in dealing with this application. The 5G DOCA Proposal, dated 24 August 2016, in turn has several features. It provides for the creation of a DOCA fund, comprising certain assets, including a cash contribution to be contributed by 5G Capital as one lump sum. The DOCA fund would also contain "The Debtors", defined as including, broadly, amounts recoverable by Denham as at the Relevant Date, including specified claims. The DOCA fund would also contain the proceeds of refunds from the Australian Taxation Office, although Mr Katekar fairly recognises that there is presently an open question as to whether such refunds would be available, which is a matter that he submits requires further investigation by the administrators.
Clause 7 in turn provides that the DOCA fund is to be applied in a specified manner, first and second, to the fees, expenses and costs of the administrators up to a maximum of $33,000 and to the deed administrators up to a maximum of $55,000, in each case including GST. It should be noted that, at that point, of the "Cash Contribution," defined as $200,000, to be made by 5G Capital, an amount in the order of $88,000 inclusive of GST would be directed to fees, expenses and costs, subject to the fact that, as Mr Albarran fairly indicates, the administrators have not presently agreed to such a cap upon their fees, expenses and costs and, if a higher amount were negotiated, or no cap were imposed, a greater amount would potentially be devoted to those fees, expenses and costs. That is, I hasten to add, not a matter for criticism of the administrators, who are of course entitled to be remunerated for their proper remuneration and reimbursed for their proper expenses and costs. It is, however, a matter to be taken into account in determining the benefit of the 5G DOCA Proposal to other creditors.
Next, the DOCA fund is to be applied to admitted claims of employee creditors in accordance with s 556(1)(e)-(h) of the Corporations Act, as if Denham was placed in liquidation, in proportion to their admitted debt. There is, as Mr Katekar also fairly recognises and as Mr Albarran's report to the Court makes clear, an open question as to whether Denham presently has employees, which is of some significance. Mr Albarran's report refers to the fact that he had been advised by the director that there were no employees of Denham, with all former employees having been transferred to a related entity in March 2015. However, he also notes that he has been contacted by the Fair Work Ombudsman, who has advised that it has received claims for unpaid employee entitlements, and identifies proofs of debts lodged in respect of outstanding employee entitlements in excess of $1.2 million. I note, in passing, that those employee claims were admitted for a notional amount at the first meeting of creditors, and may well be admitted for a notional amount at the second meeting of creditors, where their position is still in dispute. I will return below to the significance of the question whether employees of Denham exist. The next step that I should note is that the fourth and fifth priorities in the application of the DOCA fund provide for the payment to 5G Capital of the Cash Contribution of $200,000, and then for payment to 5G Capital of the Preserved Priority Amount, defined as $500,000.
I note, for completeness, that, at least implicitly, the DOCA proposal subordinates amounts due to 5G Capital and SPV28 less the Preserved Priority Amount, so far as the last step of cl 7 of the 5G DOCA proposal is for payment of any surplus, excluding the Preserved Priority Amount and Cash Contribution which had higher ratings, to 5G Capital, then SPV28, then Denham. Any benefit of that provision turns, of course, upon the availability of such a surplus, and whether such a surplus would exist, such that the secured creditor was deferring its entitlement to it. This clause has one other significant implication, which was acknowledged by Mr Katekar, again fairly, in the course of submissions. I noted above that it is unclear whether Denham has employees, but there are presently claims of $1.2 million by way of employee entitlements. If Denham does have employees, and those claims are justified, then the amount of new funds contributed by 5G Capital would only be sufficient to fund the administrators' fees, expenses and costs, and about 10 cents in the dollar of employee claims, unless it was devoted, as Mr Katekar suggests, instead to funding claims for recoveries against third parties, in which case it would not be available to employees at all. If, on the other hand, Denham has no employees, or their claims are not justified, then the amount of new funds would be distributed only to fees, expenses and costs of the administrators and deed administrators, and then returned to 5G Capital, again unless it was applied first to funding claims against third parties. It seems to me that it is illuminating, in these circumstances, to consider where such new funds will be distributed, in circumstances that other claims are, subject to the matters which I will refer below, equally available to a liquidator.
Clause 9 of the 5G DOCA Proposal provides that the proposal is conditional upon the execution of a deed of company arrangement between 5G Capital on terms as set out in the proposal and such other terms as are acceptable to 5G Capital. It is not entirely clear whether that clause permits 5G Capital to require the inclusion of additional terms, at its discretion, or whether it contemplates only that the administrator may propose such additional terms for 5G Capital's approval. It is plain enough, however, that that clause suggests that any additional matters included in the 5G DOCA Proposal would depend upon the consent of 5G Capital.
Mr Albarran has, as I noted, also provided a helpful report as to Denham's position, which indicates that it has a very small estimated surplus of assets, in the order of $50,000, that it has accounts receivables totalled as approximately $11 million, although Mr Albarran, again, fairly, notes that at the preliminary stage of his inquiries and, on the information available to him, it appears that approximately $7.7 million of that amount, or the vast majority of it, will not be collectible. What is then left are several claims against Hakea Holdings Pty Limited, BaptistCare ACT & NSW and the Islamic Republic of Pakistan, all of whom appear, perhaps not coincidentally, to oppose this application for adjournment of the winding up application. Mr Albarran also refers to what appears to be perceived as an advantage of the 5G DOCA Proposal, and was put as such by Mr Katekar in this application, namely that the Building and Construction Industry Security of Payment ("SOPA") legislation in NSW and ACT would, potentially, allow an administrator to pursue a claim against clients of Denham, without allowing a right of set-off for contractual claims by those clients, for example by way of defects, by contrast with the position in a liquidation under s 553C of the Corporations Act, where the principal would have a statutory right to offset such claims.
Mr Katekar fairly notes that the extent of that advantage would depend upon the manner in which that was ultimately treated within a deed of company arrangement. It would also depend upon other matters, as Mr Katekar fairly conceded, including whether the principal would be able to injunct Denham or the deed administrators from proceeding in that manner (as, in other proceedings, principals have successfully injuncted Denham from proceeding in that manner) and whether a deed of company arrangement which sought to treat such principals in a manner that required them to pay Denham in full, and then to prove for their countervailing losses as unsecured creditors in a liquidation, would be set aside under the provisions of the Corporations Act which permit deeds of company arrangement to be set aside in an appropriate case. A further issue arises in respect of that approach, not addressed by Mr Albarran in his report, but again fairly acknowledged by Mr Katekar in submissions, namely that recoveries from principals made in this manner would fall within the security of 5G Capital, such that any benefit to be obtained by unsecured creditors from them depends upon 5G Capital not exercising its rights, under its security, in a manner which it has not committed not to do, so as to seize such moneys when they are received, before they are available to the deed fund.
Mr Albarran also fairly refers, as I have noted, to the extent of employee entitlements claimed, while recognising his dispute as to those matters. He also refers to unsecured creditors' claims, while fairly recognising that the question whether those claims are justified remains open, including claims of the Australian Taxation Office in excess of $1.7 million, of the Office of State Revenue in excess of $527,000, and of trade creditors in excess of $40 million totalling nearly $43 million.
Mr Albarran in turn refers, in his report to the Court, to the customary comparison between the recoveries on the liquidation and the recoveries on an administration, which would usually be undertaken in a report provided at the second meeting of creditors, but at this stage there has been no assessment (and I say that without criticism of the administrators given the short time in which they have been in office) of the recoveries on a liquidation. It must be recognised, however, that that fact makes it more difficult for the administrators to establish that the continuance of the administration is in the interests of Denham's creditors, by comparison with the alternative, even at a stage where they are now further advanced in the period to the second meeting of creditors. Mr Albarran also notes that he is not in a position to provide a comparison of the estimated return from the winding up to that of a deed of company arrangement.
The administrators also rely on the affidavit of the solicitor for 5G Capital, Mr Hunt dated 29 August 2016, who indicated his instructions that 5G Capital intends to finalise the 5G DOCA Proposal, in evidence which was admitted with a limitation under s 136 of the Evidence Act 1995 (NSW) that it was evidence of that instruction and not proof of the relevant facts.
The administrators also rely on an affidavit of Mr Beames dated 31 August 2016. Mr Beames is the surety underwriting manager at AAI Limited trading as Vero Insurance and expresses support for the continuance of the administration. Much of Mr Beames' affidavit is in the nature of evidence of his understanding, or of submissions, and was admitted on that basis. With all respect to Mr Beames' analysis, it seems to me that there are gaps in that analysis which limit the utility of his opinions. In particular, it seems to me that Mr Beames has not had sufficient regard to the obstacles which exist, to which I have referred above, to any attempt to treat claims against third parties in a manner that will allow Denham to recover against those third parties in full, and leave them to prove as unsecured creditors in a deed administration, contrary to the approach which would be adopted in a liquidation under s 553C of the Corporations Act. It also seems to me that Mr Beames has largely failed to recognise the fact that investigations, which he considers should be undertaken, may equally be undertaken by a liquidator appointed to Denham in a winding up.
Mr Katekar submits, as I have noted, that the administration is only partly advanced and the administrators have been in office for a relatively short time, and the 5G DOCA Proposal represents a potential benefit to unsecured creditors through the $200,000 contribution and the compromise by 5G Capital of $2.7 million of its priority. I do not accept that submission. I have set out above the manner in which the $200,000 contribution is to be applied and it seems to me that it represents a benefit to the administrators and the deed administrators, so far as it will allow their remuneration, costs and expenses to be paid; it represents a benefit to 5G Capital, so far as it will be repaid to 5G Capital, if there are no employees; and it represents little benefit to employees, so far as it will not be paid to them if it is used to fund claims against third parties, and, if it is paid to them rather than used for that purpose, it would only allow a payment of in the order of 10 cents in the dollar of their claimed amounts, at the cost of excluding them from their entitlements in a liquidation under the Fair Entitlements Guarantee scheme.
The value of the compromise by 5G Capital of its priority in turn depends upon whether there would be sufficient recoveries available, in the relevant circumstances, to make that compromise meaningful. That is a matter which, on the state of the inquiries now made by the administrators, and the evidence before me, does not seem to me to reach the level that it could be described as even optimistic speculation, so far as the position as to unrecoverable debts and the account as between the principals of construction contracts and Denham is concerned. In particular, it seems to me that much of that approach depends upon, as I have noted above, seeking to engineer a position where principals are required to pay in full under the SOPA legislation, while not permitted to exercise any right of setoff, in circumstances that there also seems to be little reason to treat that possibility as rising to the level of optimistic speculation.
Ms Williams in turn submits that the Court cannot be satisfied of the matters specified in s 440A(2) of the Corporations Act on several bases. First, she submits that the 5G DOCA Proposal would only delay the winding up of Denham and that delay will prejudice creditors. Mr Katekar in turn responds that the delay that is presently sought, until after the second meeting of creditors, is only for a short period, implicitly subject to the qualification that the delay would, of course, be longer if the majority by number and value of those admitted to voting (particularly if disputed creditors were admitted only to a nominal value) were to approve the deed of company arrangement.
I accept, broadly, that a relatively short adjournment is sought by the administrators, but it seems to me that the prejudice to some creditors is clear, and the advantage to other creditors has not been established to the level that I can be satisfied that it is a real possibility. In particular, it seems to me that there is a very real, and very substantial, prejudice to employee creditors who are shut out of entitlements under the Fair Entitlements Guarantee scheme, by further delay in a winding up, if those employees are employees of Denham, and in circumstances that the 5G DOCA Proposal delivers them little benefit. There is also no suggestion that those several creditors, against whom claims are also made and who appear in support of the winding up application, see any benefit in the 5G DOCA Proposal to them, so far as it would exclude the right of set-off that would be available in a liquidation, if, in fact, that result can be achieved. To the extent that the other creditors include trade creditors, the result for them appears, as I have noted above, to depend upon engineering the unavailability of a set-off, if that can be achieved.
Ms Williams refers to a number of other potential adverse impacts on unsecured creditors, including any effect upon the relation-back day. I give less weight to those other matters, where they appear to me to depend upon events in the future, and greater weight to the immediate prejudice, to which I have referred, in respect of persons who may, in fact, be employees of Denham, and the absence of any benefit which has been demonstrated to the point even of optimistic speculation in respect of other creditors. Ms Williams points to other issues as to the potential recovery of the four receivables that are subject to litigation, to which I have largely referred in dealing with Mr Katekar's submissions above. Ms Williams also identifies the fact that those creditors would, in turn, move to set aside a deed of company arrangement if it sought to proceed in a manner that did not respect their right of set-off in a liquidation. Again, I give less weight to that matter, although recognising that that may be a relevant fact in applications of this kind, than to the fact that the advantages of the 5G DOCA Proposal have not risen to the level that I am satisfied that it is in the creditors' interests that the winding up be deferred to allow it to be implemented, or to allow further steps to be taken to negotiate it from its present state. Ms Williams also refers to the position of employees, who she submits will be disadvantaged if the administration is continued, and that is a proposition I have accepted above, so far as there may be present employees of Denham. Ms Williams also submits, and I accept, that there is some disadvantage to A Murray & Sons, so far as it would be deprived of its priority in respect of the costs of a winding up, but I give little weight to that matter in the overall outcome.
For the reasons that I have set out above, I am ultimately not satisfied that, even at a relatively early stage of the administration, the 5G DOCA Proposal is such that the Court can be satisfied that it is in the interests of Denham's creditors for Denham to continue under administration rather than be wound up. The most significant matters in my reaching that finding are, as I have noted above, that the Court cannot be satisfied that the benefits of the 5G DOCA Proposal rise to the level of more than mere optimistic speculation, if they rise so far; there is real detriment to employee creditors from the continuance of the administration, to the extent that they are employees of Denham; and that there are real obstacles to achieving the substantive aim of the 5G DOCA Proposal, putting aside for the moment the question of whether it is a proper aim, of seeking to ensure that some creditors are not able to exercise any right of set-off that would be available in a winding up and, therefore obtaining greater recoveries for other creditors, or at least for 5G Capital, if it is able to intercept and chooses to intercept payments that are received from such creditors prior to their reaching the deed fund.
For these reasons, the application for the adjournment of the winding up application is dismissed. I make a further order that the administrators pay the costs of the adjournment application.
[3]
Winding up application
As I noted above, by Amended Originating Process filed on 1 July 2016, A Murray & Sons applies to wind up Denham. This matter has had a long and tortuous history, which is recorded in earlier judgments of the Court, culminating in an unsuccessful application by administrators appointed to Denham, immediately prior to the hearing of the winding up application, further to adjourn the winding up application.
By way of brief background, CSR Building Products Ltd ("CSR") originally applied for an order winding up Denham under s 459P of the Corporations Act, based on a failure to comply with a creditor's statutory demand. CSR did not pursue that winding up application, apparently after its debt was paid, and, after a series of disputes, A Murray & Sons was substituted as creditor in the winding up application, which has now proceeded to hearing. A Murray & Sons relies, in its winding up application, on the service of the creditor's statutory demand by CSR and Denham's noncompliance with that demand. It is well established that a party which is substituted as applicant in a winding up application may rely on the noncompliance with a creditor's statutory demand that was issued by the party for which it is substituted: Earthwave Corporation Pty Ltd v Starcom Group Pty Ltd [2011] NSWSC 694 at [11]; Re C2C Investments Pty Ltd [2012] NSWSC 1443; (2012) 92 ACSR 266 at [19]-[20]; Re Denham Constructions Pty Ltd [2016] NSWSC 948 at [12]. I am satisfied that a presumption of insolvency arises from the failure of Denham to comply with the creditor's statutory demand served by CSR, and no attempt has been made to displace that presumption in this application.
There is, in any event, evidence which provides support, if further support were needed, in respect of that presumption of insolvency, including a preliminary report provided by the administrators to Denham which indicates that, on any view, there are very substantial creditors' claims against Denham, which it appears is now not operating a continuing business, and a significant forecast deficiency on a winding up. The administrators recognise a number of indicia of insolvency in respect of Denham, although they fairly recognise that their inquiries are at a preliminary stage. There has been no attempt, as I noted above, to seek to establish Denham's solvency and a secured creditor of Denham, 5G Capital, which had previously opposed the winding up application, inter alia on the basis that it was working to provide further finance to Denham, has now altered its position so that it also supports the winding up application.
In these circumstances, I am satisfied that a presumption of insolvency arises, and has not been rebutted and is, indeed, supported by the additional evidence to which I have referred. I note, for completeness, that Ball J also expressed the view in other proceedings (which I recognise is not binding in this matter) that Denham was or was likely to be insolvent. That is consistent with the result which arises, in this case, from the application of the presumption of insolvency, which has not been rebutted.
There was a question in this case to the identity of the liquidator to be appointed in this case. As I noted above, administrators were originally appointed to Denham, immediately before the winding up application was due to be heard, but they have not put any submission that they should be appointed as liquidators. It is likely to be preferable, in the circumstances, and given the number of intervening creditors with which those administrators have been in contest in the adjournment application, that new liquidators be appointed.
A Murray & Sons has filed a consent of liquidator of Mr Alan Hayes, and draws attention to the usual practice of the Court, recognised, inter alia, in Re El Zorro Transport Pty Ltd [2013] NSWSC 1082 at [5] of appointing the plaintiff's nominee as liquidator, all things being equal, where there is nothing to be said between competing nominees as to their respective fitness, qualifications or cost. 5G Capital has indicated a concern, which seems to me to have been fairly raised, although I have ultimately concluded that it has been addressed in further evidence before me, as to whether Mr Hayes had sufficient resources to conduct the liquidation, and had sufficient experience to do so. That question has been addressed by further oral evidence led from Mr Hayes, which establishes that he has significant experience as a liquidator; is an official liquidator; that he has experience in the liquidation of substantial enterprises, including construction companies; and that he has experience in litigated matters, which seems to me to be relevant in this case given the extent of existing litigation that exists between Denham and various of its clients.
Mr Hayes accepted, in cross-examination, that he did not have experience of a position where the company to which he was appointed was involved in litigation in the Australian Capital Territory, New South Wales and Queensland, and that he did not have experience of litigation against a foreign government, which is one of the parties with which Denham is in litigation. It seems to me, however, that the majority of liquidators, including competent and experienced liquidators with many years' experience, would not have been involved in multi-state litigation, and it is not the case that the Court will only appoint liquidators from the largest insolvency firms. The fact that an experienced liquidator has not had experience, in previous years, of multi-state litigation does not mean that, having had experience of large litigation in one state, he or she, with the existence of external legal advisors, will not have the ability to conduct litigation in other states. Mr Hayes has also been a partner with a large and well known insolvency firm and is an official liquidator, being eligible for appointment by this Court. I recognise the scale and likely complexity of the winding up and the character of the parties to which Denham will potentially be opposed in respect of claims to recoveries. I am satisfied that, although Mr Hayes is a partner in a relatively small firm, he is likely to have the capacity to undertake the liquidation, drawing upon additional resources as he indicated would be done in the ordinary course, and retaining legal advisers to assist him as needed.
In these circumstances, it seems to me that the Court should adopt the usual process of appointing the liquidator nominated by the plaintiff. I have regard, in that respect, to the fact that 5G Capital has proposed an alternate liquidator, although, ultimately, the evidence before me does not lead to the result that that alternate liquidator, while no doubt properly qualified for appointment, and a partner in a larger firm than Mr Hayes' firm, would be any better qualified for appointment than Mr Hayes.
A Murray & Sons accepts that this is a proper case for an order that its costs be costs in the winding up application, but submits that that order should make clear that it should be allowed its costs of its application to be substituted, and its costs of the earlier adjourned winding up application. It seems to me that those costs are properly treated as costs of the winding up, where the substitution application was a necessary step to the winding up, and the earlier adjournment application was also a step on the way to its ultimately successful winding up application.
I make the following orders:
Denham Constructions Pty Ltd be wound up in insolvency.
Mr Alan John Hayes be appointed to act as liquidator of Denham Constructions Pty Ltd.
The Plaintiff's costs, including its costs of the substitution application, the earlier adjourned winding up application, and all reserved costs, be its costs in the winding up.
[4]
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Decision last updated: 12 October 2016