Supreme Court of Queensland|2008-12-18|Before: McMurdo J

Octaviar Investment Notes Ltd, Re [2008] QSC 342 (18 December 2008)

RE: OCTAVIAR INVESTMENT NOTES LIMITED (FORMERLY MFS INVESTMENT NOTES LIMITED)

HIS HONOUR: The Public Trustee of Queensland is the applicant to wind up four companies. Each of those applications has been adjourned for further hearing today.

Yesterday, at meetings of creditors, the scheme of arrangement was put by administrators to the meeting. In relation to two of these companies, creditors did not accept the proposal and Public Trustee today seeks orders for their liquidation. They are Octaviar Investment Notes Limited and Octaviar Investment Bonds Limited.

The only creditors of those companies are the Public Trustee representing certain note holders and the interest which I have previously described as Challenger. Challenger supports the application for the winding up of these two companies and supports the appointment of the Public Trustee's nominees as liquidators, who are two people from Ferrier Hodgson.

The companies, that is, Octaviar Investment Notes Ltd and Octaviar Investment Bonds Ltd, do not now oppose the applications for their winding up. Nor is there any opposition from any other party to that course.

At a previous hearing, there was a question as to whether the Public Trustee or the note holders that he represents were creditors or, instead, contingent creditors. I've been told by counsel for the Public Trustee that the position according to the evidence is that the note holders are now indisputably creditors and nothing is said against that submission.

The applications are made, of course, upon the insolvency ground. It is plain that that ground is established. Again, there is no suggestion to the contrary.

The only issue in relation to these two companies to be wound up has been one concerning the identity of the liquidators. On behalf of the companies, an affidavit of an officer of the company has been read, setting out a number of matters said to be relevant to that issue. The companies' arguments are that the administrators or someone else from the same firm are the appropriate liquidators, essentially for reasons of economy and convenience, having regard to the work done by administrators or their firm so far in the administration of these companies and others and the ongoing work, at least for the time being pending further litigation by people from that firm in the administration of the deed, which was approved for other companies. That is a relevant consideration but it is not the only one.

There is, undoubtedly, a dispute between the Public Trustee or the interests he represents and the administrators, which is likely to result in a hearing to impugn the deed of company arrangement to be executed in consequence of the outcome of the creditors meeting in the company, Octaviar Ltd. The Public Trustee is strongly critical of the administrators in that respect and, in particular, as to the administrators' approach to the validity of a security which was granted to a company, which I will call "Fortress", at the commencement of this year. Now, I do not mean to suggest that I have a view as to the merit of the Public Trustee's complaint in that respect. That will almost inevitably be a matter to be litigated, but the fact that the Public Trustee has that complaint is relevant to the present issue of whether the administrators or people from their firm ought to be liquidators of these two companies.

I have a letter from solicitors acting for Challenger which supports the applications for winding up and for the appointment of the two individuals proposed from Ferrier Hodgson or the alternative proposal to appoint someone from the firm of McGrath Nicol. In other words, all creditors of these two companies wish those persons to be appointed as liquidators and oppose the appointment of the administrators or someone from their firm. That is a very important consideration and as there is on its face a logical explanation for the preference, it is, I think, fairly conceded on behalf of the companies that according to the authorities, ordinarily, the preferences of the creditors should be accepted.

There are some other matters raised by the companies about the appointment which is proposed. One is that Ferrier Hodgson has had an involvement with this group and, in particular, as an advisor to the note holders represented by the Public Trustee during sometime earlier this year. I refer to that involvement in reasons for judgment I gave last September: [2008] QSC 216 at [21]. In my view, however, that is not a matter which makes it inappropriate for two persons from that firm to be appointed.

Further, it is said that there is a potential preferential payment to be investigated by a liquidator which is a payment of approximately $14 million made by Octaviar Investment Notes Ltd through Octaviar administration in April this year. However, against that, as I have said, both creditors favour the appointment of the persons from Ferrier Hodgson. It may be that that suggested preferential payment has not been considered by Challenger, but no doubt, if Challenger considers that this is a difficulty so far as the appointment of Ferrier Hodgson is concerned, it can move for a substitution of another person or persons as liquidators.

Accordingly, there will be orders for the winding up of Octaviar Investment Bonds Ltd and Octaviar Investment Notes Ltd, in each case upon the insolvency ground, and it will be further ordered that the appointees as liquidators be Mr W M Colwell, Mr G M Maloney and Mr Gothard of Ferrier Hodgson. It will be further ordered that the applicant's costs of and incidental to the application in each case be the applicant's costs on the winding up.

I mention, then, one further matter which was argued in relation to these two companies. It is a submission made on behalf of OPI Pacific Finance Ltd, which is not a creditor of either company, that there should be an order in its favour in the winding up of these companies. In particular, what is sought is an order that its costs be costs in each of those liquidations.

As appears from previous judgments, it has participated in earlier hearings for the winding up of these companies and others. In so far as these companies are concerned, its participation was by leave because it is not a creditor. It is, in my view, not at all appropriate that it should have the costs or part of the costs of its participation from the winding up of these companies in which it has no interest as creditor. There is the further consideration that at least until today it has opposed the winding up of those companies. So there will be no order made in its favour in relation to these two companies.

Turning then to the other applications which are returnable today, which are for the winding up of Octaviar Ltd and Octaviar Financial Services Ltd, the Public Trustee seeks a further adjournment of the hearing and seeks a further extension of the date by which those applications are to be determined. The latter order, of course, is sought pursuant to section 459R(2). I have previously made an order under that section extending the date for the determination of the applications to 18 February, next. The reason for the further adjournment of the winding up applications is to permit the Public Trustee to challenge the deed of company arrangement which was approved at yesterday's meetings. The deed itself has not yet been executed and according to the authorities therefore, that application to challenge the deed cannot be made at this point. The applicant proposes that the applications be adjourned to 6 March next. There is no submission made against that proposal, nor is there any opposition to the application to extend time under section 459R until 6 April 2009. Accordingly, there will be orders in those respects in each of the applications for Octaviar Ltd and Octaviar Financial Services Ltd. There will be a further order that the applicant's costs of and incidental to today's hearing be the applicant's costs in the winding up.

In the Octaviar Ltd application, there will be an order for the administrators' costs of today to be reserved. In each of these two applications to be adjourned, there will be an order reserving the costs of OPI Pacific Finance Ltd.

Octaviar Investment Notes Ltd, Re [2008] QSC 342 (18 December 2008)

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Octaviar Investment Notes Ltd, Re [2008] QSC 342 (18 December 2008)