4 The machines sold were delivered to different locations where an occupier of a site, such as a shop, had agreed to take the machine. In some cases, the invoice identified a machine by serial number. In most cases, it did not. In a few cases, the serial number for a machine sold to an investor is recorded on the investor's file.
5 The usual practice was for prospective purchasers to place a deposit on a machine. Once the company identified a suitable site for the location of the machine, it required full payment for the machine. When the purchaser paid the balance of the purchase price, the purchaser also entered into a management agreement with the company.
6 The usual form of such an agreement provided that the company would pay to the purchaser a rental income of a stipulated amount per month. During the currency of the management agreement, the company was entitled to the income derived from sales made through the machines. The investor was to receive a regular monthly return by way of rent.
Categories of Claimants
7 The claims of investors fall into a number of categories. The first category comprises cases where the contract was for the sale of a specific machine or machines, identified by serial number, or by some other specific identifying feature. Such a serial number might appear from the invoice, or from the management agreement. It is clear that, in such a case, the contract was for the sale of specific goods within the meaning of the Sale of Goods Act 1923 (NSW), or was for the sale of ascertained goods (In re Wait [1927] 1 Ch 606 at 630), or the company appropriated an identifiable machine to the contract. In any such case, upon payment, property in the machine passed to the purchaser.
8 The second category of case is similar to the first, in that there was a contract for sale of specific or ascertained goods, or an appropriation of goods, which can now be identified, to a particular contract, but there were successive sales of identified machines to more than one buyer.
9 The liquidator's investigations disclosed, as I understand it, that there are seventy-six machines which have been sold, or purportedly sold, by the company, either twice or, in some cases, up to four times, to different investors. This category of claims raises questions of priority between successive buyers.
10 The third category of case is where it is not possible, because of the company's inadequate record-keeping, to identify particular machines as having been appropriated to individual contracts. In this class of case, investors can show that they bought one or more machines and that the company entered into management agreements with them in respect of those machines. The machines are identified by description. However, it is not possible for the liquidator to identify which machines of that general description were bought and hired out to the company pursuant to the management agreements. The company does not have in its possession as many machines as it would need to satisfy the claims of all of the investors of this class.
11 The fourth category of claim is by investors from whom the company had agreed to buy back a machine or machines, but where the "buy back" agreement has not been completed, and money is still owed by the company to the original purchaser of the machine.
12 There is another class of claimants, namely, those who have paid a deposit towards the purchase of the machine, but where no purchase agreement or management agreement was concluded, and no machine was appropriated to the contract. These persons are unsecured creditors of the company for the amounts of their deposits.
Directions
13 The liquidator now seeks directions pursuant to s 511 of the Corporations Act 2001 (Cth) as to the basis on which he would be justified in dealing with the vending machines in the company's possession.
14 On 29 July 2006, the liquidator (then the administrator) entered into a licence agreement with a third party, Nicholls Engineering Pty Ltd. Under that agreement, Nicholls Engineering took over all of the management agreements that the company was administering at the time of the administrator's appointment. Nicholls Engineering has foreshadowed that it might terminate that agreement. The matter is urgent because the liquidator will wish to sell the machines if he can do so, or otherwise distribute them in specie to the persons entitled to them. If the machines are no longer serviced, there is a real risk that the occupiers of premises on which they are located may throw them out, and they may become worthless.
15 The liquidator proposed to the investors that he would seek orders that he distribute in specie those vending machines where the owner had been identified, subject to his receiving his costs of recovery and distribution of the machines. He also proposed seeking orders that he sell those machines where no owner has been identified and distribute the sale proceeds, less costs incurred in respect of the recovery and sale of the machines, on a pro rata basis. The overwhelming majority of investors have agreed to this proposal.
16 In the originating process, the liquidator sought declarations as to the title to the machines. All of the known investors (who number in the hundreds) were named as defendants. However, the liquidator has confined the present application to one for directions pursuant to s 511 of the Corporations Act.
17 The only binding effect of such directions is that:
" ... the liquidator, if he has made full and fair disclosure to the Court of material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in relation to anything done by him in accordance with the direction. "
(Re G B Nathan and Co Pty Ltd (in liquidation) (1991) 24 NSWLR 674 at 679.)
18 Nonetheless, having regard to the large number of claims and, in many cases, the comparatively small amount which may be at stake for the investors, the directions may well have the practical effect of dictating the course of the liquidation and the amounts different classes of investors receive.
First Category - Sales of Identified Machines
19 I turn to the first category of claimants. As I have said, it is clear that, in respect of this class, the investor became the legal owner of the machine upon, at the latest, payment for the machine and the appropriation of the identified machine to the contract. Where a specific machine can be matched to a specific contract and where there are not multiple claims to the same machine, the liquidator is justified in acting on the basis that that investor is the legal owner.