Onefone Australia Pty Ltd v One.Tel Ltd

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 4772B, 479(3), 506(1A), 511(1)(a), 511(2), 547

BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322 Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 Dean-Willcocks v Soluble Solution Hyrdoponics Pty Ltd (1997) 42 NSWLR 209 Elfic Ltd v Macks [2001] QCA 219; [2003] 2 Qd R 125 Ex parte McGrath; Re Pan Pharmaceuticals Ltd [2008] FCA 563; (2008) 26 ACLC 386 Francis v Emu Brewery Mezzanine Ltd [2009] FCA 1212 CASES CITED : Hall re Australian Capital Reserve Ltd [2008] FCA 1895 Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139 McGrath re HIH Insurance Ltd [2005] NSWSC 731 Meadow Springs Fairway Resort Ltd v Balanced Securities Ltd [2007] FCA 143; (2007) 25 ACLC 1433 Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290 Re Anglican Insurance Ltd [2008] NSWSC 41; (2008) 26 ACLC 147 UTSA Pty Ltd v Ultra Tune Australia Pty Ltd [1997] 1 VR 667

Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff PARTIES : Concept Systems (Australia) Pty Limited - Fourth Plaintiff One.Tel Limited - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant Paul Gerard Weston - Special Purpose Liquidator - Applicant

COUNSEL : Mr N A Cotman SC/Mr R D Glasson - Special Purpose Liquidator - Applicant

SOLICITORS : O'Neill Partners Commercial Lawyers - Special Purpose Liquidator - Applicant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

2003/086446 ONEFONE AUSTRALIA PTY LTD v ONE.TEL LIMITED JUDGMENT 1 By interlocutory process filed on 14 May 2009 and heard by me in closed court on that day, the special purpose liquidator of One.Tel Limited sought various orders directed towards further performance of functions related to the pursuit of litigation initiated by him for the benefit of creditors of One.Tel. 2 The subject matter of the application was of a commercially confidential and sensitive kind, related to aspects of the litigation that any plaintiff, protecting its own interests and the integrity of the litigation process in which it is engaged, would take particular care to keep from the other party or parties to the litigation. Those aspects relate to the funding of the litigation. 3 The clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors (particularly where the creditors are numerous) and the equally clear public interest in the due administration of justice in the particular litigation therefore warranted a hearing in closed court: compare McGrath re HIH Insurance Ltd [2005] NSWSC 731. 4 The decision of the court upon the special purpose liquidator's application was that most of the orders sought should be made. These include an order under s 477(2B) of the Corporations Act 2001 (Cth), as applied by s 506(1A) to a creditors voluntary winding up such as the present. 5 The public interest considerations just mentioned caused the court's reasons relating to most aspects of the application to be delivered to the special purpose liquidator in the absence of the public. An order as follows was made in relation to those reasons: "Order that, until further order (made on the application of, or with at least two business days' notice to, the special purpose liquidator of One.Tel Limited), the reasons delivered this day to the special purpose liquidator in the absence of the public (a) remain in the court file in a sealed envelope marked "confidential"; (b) not be accessed by any person; and (c) not be posted on the Caselaw New South Wales website." 6 There is, however, one aspect in respect of which reasons should be published generally. That aspect is dealt with in these separate reasons to which no confidentiality restriction applies. 7 The special purpose liquidator sought the guidance of the court on the question whether he was justified in taking the steps caught by s 477(2B) (as applied by s 506(1A)) with the approval of the court only and without any approval of either the committee of inspection in the One.Tel winding up or the One.Tel creditors; also whether he was justified in taking those steps without informing the committee and the creditors of the identities of third parties involved in the taking of the steps. 8 This aspect of the special purpose liquidator's application was based on a combination of s 511(1)(a) and s 511(2) of the Corporations Act. They are in the following terms: "(1) The liquidator, or any contributory or creditor, may apply to the Court: (a) to determine any question arising in the winding up of a company; or …

(2) The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just." 9 The availability of these provisions as a basis for the equivalent, in general terms, of a s 479(3) direction has been confirmed in a number of cases. Among the more recent are Meadow Springs Fairway Resort Ltd v Balanced Securities Ltd [2007] FCA 143; (2007) 25 ACLC 1433, Ex parte McGrath; Re Pan Pharmaceuticals Ltd [2008] FCA 563; (2008) 26 ACLC 386, Hall re Australian Capital Reserve Ltd [2008] FCA 1895 and Francis v Emu Brewery Mezzanine Ltd [2009] FCA 1212. As Young J pointed out in Dean-Willcocks v Soluble Solution Hyrdoponics Pty Ltd (1997) 42 NSWLR 209, the making of what amounts to a direction that the liquidator in a voluntary winding up is justified in taking a particular course is within s 511(1)(a) and s 511(2) if the circumstances of the particular winding up raise a question as to the propriety or desirability of pursuing that course. 10 Where, as here, a liquidator applies ex parte under s 511(1)(a), the court should consider whether the question posed by the liquidator is one that so impinges on the interests of other persons that it is preferable to withhold the answer the liquidator seeks and to allow the matter to be raised in appropriately constituted proceedings to which those persons are parties: see, for example, Re Anglican Insurance Ltd [2008] NSWSC 41; (2008) 26 ACLC 147. 11 The issue raised by the aspect of the special purpose liquidator's application referred to in paragraph [7] above is therefore whether the committee of inspection or the creditors generally have any right or expectation that would be compromised if the special purpose liquidator went ahead and took steps approved by the court under s 477(2B), but without consultation with the committee or the creditors as a whole. 12 The short answer is "No". The court, the committee of inspection and the general body of creditors are alternative approving authorities under s 477(2B). Each may act independently of the other, although s 547 enables the court to seek an expression of the wishes of the general body of creditors, if minded to do so. Where, as here, a liquidator approaches the court and the court grants approval, there is no requirement or expectation that the committee of inspection be consulted either in advance of the application or after the approval has been granted: UTSA Pty Ltd v Ultra Tune Australia Pty Ltd [1997] 1 VR 667. The separateness of the three approving authorities was emphasised by the Court of Appeal (Spigelman CJ, Hodgson JA and Austin J) in Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139 at [135] - [140]; see also Elfic Ltd v Macks [2001] QCA 219; [2003] 2 Qd R 125. 13 As to the wider aspects mentioned at paragraph [7] above, it can be said at once that no provision of the Corporations Act requires that the special purpose liquidator inform or consult either the committee of inspection or the body of creditors on those aspects. Dealing specifically with the committee of inspection, the analysis and discussion in a judgment of 12 December 2008 (Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290 at [27] and following) of the role and powers of such a committee in a creditors voluntary winding up such as the present are again relevant. 14 The matters now under discussion do not come within any of the enumerated statutory powers of such a committee of inspection. That, coupled with the fact that a committee of inspection in a creditors voluntary winding up has no power to give directions to which the liquidator must have regard (see paragraphs [38] to [45] of the 12 December 2008 judgment) means that it is for the special purpose liquidator alone to decide whether, and if so, to what extent the committee of inspection should be consulted by him on the matters in question. If his decision is to refrain altogether from consulting and to communicate to the committee only such information as he thinks fit in the due conduct of the administration committed to him, that is entirely a matter for him. 15 It is also appropriate to record, in relation to the special purpose liquidator's application of 14 May 2010, that members of the committee of inspection and individual creditors did not occupy any position attracting the protection of the principles of procedural fairness associated with Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 and BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322. They were not, in the context of the liquidator's application for s 477(2B) approval and related guidance, persons against whom "a claim or charge is made" (to use the language of Rich J in the former case) or "likely to be adversely affected by the order of the court" (in the words of Spigelman CJ in the latter case) so as to attract a right to be heard. 16 For these reasons, the special purpose liquidator appropriately brought the application of 14 May 2010 ex parte and the questions he raised about involvement of the committee of inspection and creditors generally were answered in the way I have indicated. 17 There were therefore directions pursuant to s 511(1)(a) and s 511(2) to the effect that the special purpose liquidator is justified in entering into the agreements the subject of the s 477(2B) approval without the prior approval of the committee of inspection or the creditors and in not providing to the committee or the creditors details of the identity of the parties thereto (other than One.Tel and the special purpose liquidator). **********

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