Solicitors:
Deutsch Miller (Plaintiff)
File Number(s): 2020/227173
[2]
Judgment - ex tempore (Revised 7 August 2020)
By Originating Process filed on 4 August 2020, and returnable on an urgent basis, the Plaintiff, Mr Woodgate in his capacity as administrator of the Australian Wine Consumers' Co-operative Society Ltd (admin apptd) ("Wine Society") seeks, first, a direction under s 90-15 of the Insolvency Practice Schedule (Corporations) ("IPSC") that he is justified in proceeding on the basis that specified provisions of the IPSC and the Insolvency Practice Rules (Corporations) are applicable in the administration of the cooperative. He also seeks an order under s 447A of the Corporations Act 2001 (Cth) that Pt 5.3A of the Act is to operate in relation to the cooperative in such a way as to apply specified provisions of the IPSC and Insolvency Practice Rules in the administration of the Wine Society. Mr Santucci, who appears for Mr Woodgate, has pointed out that the orders sought parallel those that were made in Re University Co-operative Bookshop Ltd (admins apptd) (No 2) [2020] NSWSC 97; (2020) 142 ACSR 607.
Mr Woodgate relies on his affidavit dated 4 August 2020, which refers to his appointment to the Wine Society and to the character of that organisation as a non-profit organisation with approximately 20,000 members, which previously carried on business in respect of the purchase of wine from importers and its distribution and, subsequently, through an outsourcing arrangement with a third party. Mr Woodgate refers to the claims of two major secured creditors, whose claims may exceed the value of assets of the Wine Society, although that may depend on questions as to the value of its intellectual property and a shareholding in the third party. Mr Woodgate also refers to complexities as to the extent to which the Co-operatives (Adoption of National Law) Act 2012 (NSW) and, the Co-operatives National Law and the Co-operatives National Regulations apply provisions of the Corporations Act where a cooperative is placed into administration. These issues were, as I noted above, addressed in Re University Co-operative Bookshop Ltd (No 2) above. Mr Woodgate also refers to the urgency of the application, where a meeting of creditors of the cooperative is to take place tomorrow, 7 August 2020.
Mr Santucci in turn refers, in submissions, to the legislative scheme by which parts of the Corporations Act are applied to the operation of cooperatives, and to my observations in that regard in Re Belmont Sportsmans Club Co-operative Ltd (admins apt) [2015] NSWSC 543 and in Re University Co-operative Bookshop Ltd [2019] NSWSC 1898 and the further observations of Gleeson J in Re University Co-operative Bookshop Ltd (admins apptd) (No 2) above. Mr Santucci also addresses the analysis in those decisions of the operation of cl 6 of Sch 1 to the Cooperative National Law, which has the capacity to apply those parts of the IPSC and Rules that correspond to those previously existing in the Corporations Act to cooperatives, but would not apply wholly new provisions introduced in the IPSC and Insolvency Practice Rules to cooperatives. Mr Santucci notes that in those cases it was necessary for the Court to make a direction under s 447A of the Act to modify the operation of Part 5.3A to apply those new provisions of the IPSC and Rules to a cooperative, at least in circumstances where it is beneficial to the conduct of the administration of that cooperative that they apply. I am satisfied that, for the same reasons that that course was taken in Re University Co-operative Bookshop Ltd (admins apptd) (No 2) above, an order should here be made under s 447A of the Act to apply provisions which would not apply, because they are new provisions outside the scope of cl 6 of sch 4 of the Co-operatives National Law, in the voluntary administration of the Wine Society.
Mr Woodgate also seeks a direction as to those provisions which are applied by reason of cl 6 of sch 4 of the Co-operatives National Law and, in particular, a direction under s 90-15 of the IPSC that he is justified in proceeding on the basis that specified provisions of the IPSC and Rules apply in that manner. He referred to the circumstances in which such a direction can be made, by reference to Re 7 Steel Distribution Pty Ltd (in liq) (recs and mgrs apptd) [2013] NSWSC 669, and the same question was addressed in Re University Co-operative Bookshop Ltd (admins apptd) (No 2) above. It seems to me that such a direction is not necessary here, not because Mr Woodgate is wrong in the approach that he proposes to take, but because he is plainly correct, and it is not necessary for a voluntary administrator who is plainly correct in his interpretation of existing case law to seek a direction that he is justified in acting in accordance with that case law.
Here, the question of those provisions which are applied by cl 6 of sch 4 of the Act, and those which are new provisions and are not, is the subject of a comprehensive analysis by Gleeson J in Re University Co-operative Bookshop Ltd (admins apptd) (No 2) above. Mr Santucci has identified no reason to doubt the correctness of that analysis. Mr Santucci rightly recognises that the direction given to the administrator in that case may not, strictly, be a precedent, so far as it does not involve a determination of a controversy between the parties. While I accept that that is so, that decision is nonetheless a careful and detailed analysis of the relevant law and there is no reason to doubt its correctness.
In these circumstances, it seems to me that it is not necessary for a voluntary administrator, in each case where this issue arises, to seek a direction which will do no more than confirm the analysis which Gleeson J has already undertaken in that case. I do not say that in any way critically of Mr Woodgate's application, because this may be the first occasion on which this issue has arisen since the decision in Re University Co-operative Bookshop Ltd (admins apptd) (No 2) above, and Mr Santucci is right in recognising that that decision may not strictly create a precedent. However, it seems to me that the decision, combined with the approach adopted in this case, should be sufficient to provide a basis for an administrator, and his or her legal advisers, to reach a view as to the operation of the relevant legislation without the need for a direction as to that question, at least and until there is any applicable change in the legislation which would raise a doubt as to the continued application of that decision. It may, of course, still be necessary for an administrator in this situation to bring an application under s 447A of the Act in respect of provisions that are not applied by cl 6 of sch 4 to the Cooperatives National Law.
For that reason, and again emphasising that that reflects not doubt as to the correctness of Mr Woodgate's analysis, but doubt as to whether there is any real controversy as to its correctness, I will not make the direction sought. I will, however, make the order under s 447A of the Act that is sought. I will also order that the costs of the application be costs in the voluntary administration, since it seems to me that it was appropriate for Mr Woodgate to seek to bring this application, notwithstanding that it has not been necessary to make all the orders that were sought.
[3]
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Decision last updated: 20 October 2020