Multi-Core Aerators Pty Ltd v Dye & Rennie [1999] VSC 205

Multi-Core Aerators Pty Ltd v Dye & Rennie [1999] VSC 205 - VSC 1999 case summary — Zoe

[26]

However, the liquidators did not acquiesce, rather, they instructed solicitors, Cornwall Stodart, to provide advice to them concerning possible claims available to the company. As a consequence, those solicitors wrote on 17 March 1999 to the applicant's solicitors requesting a copy of any memorandum of legal advice that the applicant had received and which would support the pursuit of claims on behalf of the company. The applicant responded by proposing a public examination of Mr Banks and other persons associated with Multi-Core Aerators Pty. Ltd. by counsel nominated by the applicant and that the applicant have effective practical control of that examination. The applicant offered to fund the public examination and any subsequent action by the company against its former directors or entities. By letter dated 14 April 1999 the solicitors for the respondents rejected the proposal. They pointed out that the liquidators considered themselves to have an obligation to act impartially in the conduct of the winding up of the company's affairs and that to do otherwise would not fulfil that duty. Further, the solicitors pointed out that the substantial creditors of the company were the applicant and the directors. Arising from the reasons for judgment of Mandie J, the correspondence between the parties and events observed by the liquidators at the creditors' meeting it is apparent that there is and has been for some time substantial hostility between the two camps. The solicitors advised that after a comprehensive review of the material before them they had recommended to the liquidators that subject to funding, the liquidators publicly examine Mr Banks, the company's accountant and the patent attorneys responsible for lodging patent applications. The solicitors pointed out that the cost of such examination would be beyond the funds available to the liquidators. Furthermore, it was pointed out that the defence of the present applicant has been and would continue to be a substantial drain on the resources available to the liquidators. It was further stated in the solicitors' letter that in the event that the public examinations yielded information that supported the institution of possible proceedings against directors the estimated cost of such litigation would be at least $100,000 together with an additional contingent liability for costs in the event of losing such proceeding in the order of $70,000. As a consequence, on behalf of the liquidators it was put that they were prepared to examine Mr Banks provided funding was received from the applicant but without the attachment of conditions. It was clearly stated in correspondence that in the absence of the applicant agreeing to fund the cost of the examination the liquidators would have no funds to conduct a public examination of Mr Banks.

[37]

Mr Dye on behalf of the liquidators refutes the allegation. He states on the basis of many years of experience involving many liquidations that there has been nothing particularly unusual, untoward or delayed with respect to the conduct of the liquidation to date. Whilst it might be said that there was some delay of a few weeks between the appointment of the liquidators in July 1998 and the completion of the realisation of assets in October 1998 part of that delay can be explained by way of the lack of assistance and co-operation from the former accountant of the company. On the basis of the evidence before me it cannot be said that the liquidator was dilatory in the conduct of the liquidation up until the end of October 1998. I move next to the issue of whether there was any delay during the period between October 1998 and the present. This consideration involves, in particular, consideration of whether it was in fact the institution of this application that geared the liquidators into action. Mr Dye has stated in his affidavit that it is usual in his experience for a liquidator to realise the assets of the company before proceeding to prosecute claims on behalf of the company. In any event, prosecution of claims involves an analysis of the alleged claim, consideration of the prospects of success of such a claim if instituted, the location or ascertainment of funds to support the commencement of litigation. I am satisfied on the basis of Mr Dye's affidavit that he has embarked on this course. It is apparent from the description of the potential claims referred to by Mr Mulcahy in his affidavit on behalf of the applicant and as further described by Mr Dye in his affidavit that the disputes relating to the Deere transactions are complex. There is a further complex issue namely, the sale and utilisation of the trademark. On the basis of the evidence before me, in particular, the affidavit of Mr Dye it is apparent that the liquidators have had to investigate complex factual circumstances, obtain legal advice and consider their position. The position of the liquidators has been exacerbated by the fact that funds of the company have to a large extent been taken up with the defence of the present application.

[46]

Whilst it might be said that in the present matter there would be little harm done if another person was appointed as liquidator there would be costs involved for the company and to the creditors in another person taking over the liquidation. As observed by Mandie, J in Tracker Software, such a factor should not outweigh concerns of lack of objectivity and impartiality. However, unlike the circumstances in Tracker Software no case has been made out by the applicant to support an assertion that there is a case for investigation against the liquidators. I observe that the conduct of the liquidation to date, essentially because of the conduct of the applicant, has been difficult. As was the case in Tracker Software, (see the observation at 649), there is a great deal of feeling and rancour between the parties but the ill feeling and rancour to the extent that it does exist has emanated from the applicant. Nevertheless, that reason alone together with all the circumstances of this matter do not lead me to be satisfied that it falls within the category referred to by Santow, J in Advance Housing of "any other circumstance". It might be said that the other circumstance is the extent of feeling and rancour between the applicant and the liquidators (although largely at the making of the applicant) so that the liquidators bear the "baggage of past disputes" referred to by Mandie, J in Tracker Software, at 649. However, in my view it is not sufficient that a court remove a liquidator merely because of levels of feeling and rancour between parties especially where the hostility has at all times emanated from the party seeking the removal of the liquidator. To do so would provide a creditor with an opportunity to manipulate the liquidation of the company. In my view to accede to the application of the applicant in the present matter would be to disregard the principle that the onus of proof borne by an applicant will not be easily discharged if the liquidator has become well acquainted with the business and affairs of the company and/or the process of winding up has almost reached completion (see Advance Housing, supra, 233; also, McPherson, Law of Company Liquidation, ibid 227-8).

At a glance

Court

Decision date

Before

Source

Judgment (47 paragraphs)

Parties

Cases Cited (2)