McDonald v Park, in the matter of MCG Resources Pty Ltd [2013] FCA 1052 | Case summary

Background 4 The background to this application is set out in the affidavit of Mr William McDonald sworn 11 October 2013. 5 Mr McDonald is the sole director of the company, as well as the sole director of B McDonald (No 2) which holds all of the shares in the company. 6 The company was wound up on 1 March 2011 by order of the Supreme Court of Queensland pursuant to s 461 of the Corporations Act on the basis that it was just and equitable that a winding up order be made. It appears from the material before the Court that the order was made following a breakdown in the relationship of the directors of the company. 7 In mid 2012 the company sold its primary asset for $30 million. Those funds were the subject of litigation between former shareholders and former directors of the company, however on 26 August 2013 the parties to those proceedings entered into a deed of settlement to resolve all outstanding disputes. All proceedings in this Court as well as in the Supreme Court have been discontinued. 8 Mr McDonald also deposes that: all priority creditors and third party unsecured creditors have been paid in full; following payment of dividends the company retains $1,472,796.74 in cash at bank and deposits paid; the balance of the monies remaining in the company after payment of the costs and expenses of liquidation will be paid to the related parties in satisfaction of their proofs of debt pursuant to the settlement deed; other than potentially a former creditor of the company, Mr Peter Bannister, there are no creditors of the company unrelated to Mr McDonald; pending resolution of any further legitimate proof of debts, the parties have completed the terms of the settlement. 9 Materially, the company is the holder of the following tenements and applications, which are of significant value: EPC 1044 EPC 1538 EPC 1560 EPC 1258 EPC 1401 EPC 1994 EPC 1529. 10 In order for the company to retain these tenements, it appears that a number of actions are required to be undertaken and documents lodged with the relevant government departments, including: Annual exploration reports and expenditure statements relating to geological data, geophysical data, geochemical data, drilling data and remote sensing data need to be drafted. Environmental authority annual returns need to be prepared for filing with the Queensland Department of Environmental and Heritage Protection. The annual rent on each tenement must be paid. A work program and/or expenditure commitment statement in respect of each tenement must be prepared. A Queensland Mining and Quarrying Industry Census form must be completed, and relevant levy paid. Partial relinquishments of a certain number of sub blocks are to be made, and a statement detailing the blocks relinquished and retained is required. In order for tenements to be transferred to a related entity as required by the terms of the settlement, the following documents are required to be prepared for each tenement: o indicative approval application; o assessment of duties payable; o transfer applications. 11 In support of this evidence Mr McDonald annexes to his affidavit a report from TECHSOL Australia Pty Ltd, a company which provides environmental consulting services. 12 Mr McDonald also deposes that: he understands that relevant work cannot be completed until the winding up of the company has been terminated; the Registrar of Mines requires an order from the Court in relation to the termination of the liquidation prior to progressing the renewals of the relevant tenements; failure to renew the tenements will mean that those tenements are forfeited to the Crown; Mr McDonald undertakes to continue to fund the company.

Consideration 13 Section 482 of the Corporations Act provides as follows: 482 Power to stay or terminate winding up (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. (1A) An application may be made by: (a) in any case - the liquidator, or a creditor or contributory, of the company; or (b) in the case of a company registered under section 21 of the Life Insurance Act 1995 - APRA; or (c) in the case of a company subject to a deed of company arrangement - the administrator of the deed. (2) On such an application, the Court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter. (2A) If such an application is made in relation to a company subject to a deed of company arrangement, then, in determining the application, the Court must have regard to all of the following matters: (a) any report that has been given to the Court by: (i) the administrator, or a former administrator, of the company; or (ii) the liquidator, or a former liquidator, of the company; or (iii) ASIC; and that contains an allegation that an officer of the company has engaged in misconduct; (b) any report that has been lodged with ASIC by: (i) the administrator, or a former administrator, of the company; or (ii) the liquidator, or a former liquidator, of the company; and that contains an allegation that an officer of the company has engaged in misconduct; (c) the decision of the company's creditors to resolve that the company execute a deed of company arrangement; (d) the statement that was given under paragraph 439A(4)(b) when the company was under administration; (e) whether the deed of company arrangement is likely to result in the company becoming or remaining insolvent; (f) any other relevant matters. (3) Where the Court has made an order terminating the winding up, the Court may give such directions as it thinks fit for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up. (4) The costs of proceedings before the Court under this section and the costs incurred in convening a meeting of members of the company in accordance with an order of the Court under this section, if the Court so directs, forms part of the costs, charges and expenses of the winding up. (5) Where an order is made under this section, the company must lodge an office copy of the order within 14 days after the making of the order. 14 In this case it is clear that B McDonald (No 2), as the sole shareholder (contributory) of the company, has standing to make an application under s 482 (s 482(1A)(a)). As Mr McDonald is not the liquidator, a contributory or a creditor of the company he does not have standing. However it is clear that Mr McDonald has joined the application as the sole director of the company and sole director of B McDonald (No 2). His lack of standing for the purposes of s 482 does not, in my view, void the application in light of the presence of B McDonald (No 2) as an applicant to this proceeding. 15 This morning in Court the applicants filed evidence that the liquidators had been served with notice of the application, and consented to the orders sought by the applicants. 16 Recently in Deputy Commissioner of Taxation v Terramyer Pty Ltd (in liq) [2013] FCA 969 Gordon J helpfully summarised discretionary factors relevant to an application under s 482 of the Corporations Act. In particular: The Court is required to exercise its discretion by reference to the particular circumstances of each case (In the matter of Lorie Najjar & Sons Pty Ltd (in liq) (2013) 94 ACSR 561; [2013] NSW SC 798 at [24]). The solvency of the company: In the matter of SNL Group Pty Ltd (in liq); SU v SNL Group Pty Ltd (in liq) [2010] NSWSC 797 at [24]. Courts generally require evidence as to solvency from a person other than the applicant: QBE Workers' Compensation Pty Ltd v P Russell Enterprises Pty Ltd [2005] NSWSC 1128 at [26]. Whether the application to terminate the liquidation has been made promptly. Whether the conduct of the company and its business has been, or will be, contrary to commercial morality or public interest: Sevior v Morgan [2012] VSC 480 at [18]. Whether the termination of the winding up will imperil future creditors of the company. 17 In this case it appears that there has never been a question concerning the solvency of the company. The reason the company entered liquidation was because of a breakdown in the relationship between the directors and because it was just and equitable that such an order be made. It further appears that this reason for winding up the company is no longer relevant because matters between the disputing directors have now been resolved, and it is only Mr McDonald who remains a director of the company. 18 In this case I am satisfied that: The company is solvent. Mr McDonald has deposed as to the cash reserves of the company. The notice of discontinuance pursuant to the settlement agreement which resolved disputes between relevant parties concerning the liquidation of the company was filed recently on 27 September 2013. The application before the Court was filed on 11 October 2013, which in my view is prompt. The company was incorporated in order to acquire coal mining tenements in central Queensland with a view to developing the land and mining the coal (affidavit of William James McDonald sworn 25 October 2012, filed in the related matter of QUD 607 of 2012). In my view this is not a business contrary to commercial morality or public interest. Rather than imperil future creditors of the company, it is clear that the termination of the winding up will benefit future creditors of the company because the continuation of the company will permit it to exploit the valuable mining tenements it currently owns. 19 The only remaining unresolved creditor of the company appears to be - potentially - Mr Peter Bannister, who (on the material before the Court) has informed the liquidators that he wishes to lodge another proof of debt. However: the nature of Mr Bannister's claim is unknown; there was no appearance by Mr Bannister in Court this morning despite the Court being informed that he had been served with a copy of the application and the relevant material; in any event, as the company is clearly solvent, Mr Bannister is entitled to pursue any claim against the company in the usual way. 20 The potential existence of a debt to Mr Bannister is not a reason to refuse the applicants the orders they seek. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.

McDonald v Park, in the matter of MCG Resources Pty Ltd

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