Supreme Court of WA|2010-02-15|Before: Simmonds J

PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2010] WASC 113 (15 February 2010)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2010] WASC 113

MATTER : Computer Accounting and Tax Pty Ltd (ACN 009 470 491) (in liq)

BETWEEN : PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD

DONALD CAMPBELL-SMITH AS EXECUTOR OF THE ESTATE OF MARTIN BANNING

Corporations - External administration - Termination of appointment of provisional liquidator without replacement - When appropriate

Adam Eyton Ltd; Ex parte Charlesworth (1887) 36 Ch D 299

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38

Re United Medical Protection [2003] NSWSC 1031

SIMMONDS J: (This judgment was delivered at the hearing and has been edited from the transcript).

1 There has now been an exchange between the parties and myself over 1 1/2 hearing days concerning the application by interlocutory process of Mrs Frigger dated 8 February 2010. That interlocutory process should, I believe, be dealt with now. I am going to indicate in oral form my reasons for disposition of that interlocutory process.

2 I appreciate that there is already pending for publication the reasons I previously gave for the appointment of the provisional liquidator and I am going to indicate that my reasons today need to be read with those reasons: see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38. I would anticipate that those reasons will be published very shortly and before the published form of the reasons I'm giving now. However, as with the earlier reasons, the judgment to be published will simply be an edited form of the reasons I am going to give now.

3 The application of 8 February 2010 seeks to have the provisional liquidator I appointed earlier by orders dated 21 January 2010 dismissed forthwith. It is not proposed that he be replaced; the effect of the application is that the provisional liquidation be terminated.

4 There are no formal provisions in the Corporations Act for the termination of a provisional liquidation as opposed to the removal of a provisional liquidator. The removal of a provisional liquidator, it was agreed on both sides and is accepted in Keay A, McPherson's Law of Company Liquidation [6.900], can be ordered under s 473(1) of the Corporations Act 2001 (Cth) (Corporations Act).

5 Termination of a provisional liquidation however raises distinct issues. Those issues include whether the purposes of the appointment of the original provisional liquidator have been achieved, and if so whether a provisional liquidator is no longer necessary, that being the basis upon which Mrs Frigger principally put her application. The issues also extend to the further matters referred to in what appears to be the principal authority on the termination of a provisional liquidation: Re United Medical Protection [2003] NSWSC 1031 (Austin J).

6 Those further matters look to any reasonable prospect that matters might arise in the future with which the provisional liquidator should deal and whether in the public interest the appointment should be terminated. I do not believe there is a public interest dimension to this case. There was, however, such a dimension in United Medical Protection.

7 The application for termination has then to be considered against that background.

8 However, the application before me was also, in [4] of the interlocutory process, the dismissal of the application for winding up in insolvency, resting primarily on statutory demands not complied with of the first and second plaintiffs in this matter, as well as Mr Forbes with no order as to costs.

9 The matter of that application I should immediately dispose of. I believe that I am not in a position to grant that application. While Mr Forbes's statutory demand has been complied with, the statutory demand of the plaintiffs has not been complied with, and Mrs Frigger confirmed to me, will not be complied with until a present pending application for stay of the judgment which gave rise to the statutory demand is disposed of. This is an application filed with the High Court of Australia by Mrs Frigger and her husband in their capacity as members of the appellant company seeking special leave to appeal that judgment.

10 The petition for winding up is due to be heard before a master of this court on 18 February 2010. It seems to me that these proceedings are not the setting in which that petition can properly be dealt with.

11 I further note that that petition rests not only on insolvency for which noncompliance with statutory demands is relied upon but also for winding up on the just and equitable ground under the Corporations Act s 461(k).

12 That matter has to do with actions taken by, in the allegations of the petitioner, the defendant company in dealings with the Friggers in their capacity as the company's directors, dealings which put at risk the company's ability to meet from its own resources the claims upon it, including the claims of the plaintiffs.

13 I therefore would not grant the application for dismissal of the winding up application.

14 I return then to the application for the dismissal of the provisional liquidator. I accept on the authorities - and Mrs Frigger has referred to a number of these in connection with the removal of a liquidator appointed in a winding up - that the removal is not limited to cases where there is a lack of fitness of the officer in question. Indeed, as I understood her submissions, Mrs Frigger is not suggesting there was any such unfitness here. Rather, Mrs Frigger makes a number of submissions in support of her application of which the principal one is that it is for the general advantage of those interested in the assets of the company, for the reason that the purposes sought to be achieved by the appointment of the provisional liquidator no longer require him to be maintained in place.

15 I have already referred to my earlier decision on 21 January 2010 for the appointment of the provisional liquidator in which I indicated that the purposes for that appointment were to better preserve the status quo for the benefit of all those interested in the company than the members' voluntary liquidation, then on foot, would achieve.

16 The cases upon which Mrs Frigger relied were principally Adam Eyton Ltd; Ex parte Charlesworth (1887) 36 Ch D 299, and Re Giant Resources Ltd [1991] 1 Qd R 107, the only authority she referred to which concerned the removal of a provisional liquidator. Both indicate that my concern should be for the purposes referred to above.

17 It seems to me that I must consider those purposes against the backdrop of the pending application for winding up of the company on both of the bases or grounds that I have described, against the fact that a demand has already been made which has not been complied with, and which it is not said the company will comply with until at least the matter of the stay application it has on foot is dealt with.

18 The concern of the Friggers, and in particular of Mr Frigger as the source of the funds to which the company has access in the form of a term deposit, is that the plaintiffs are insolvent. He put to me strongly, in submissions that were echoed by Mrs Frigger, that payment to such entities by the company, and I understood by this him to mean from sources or from a source provided by him, would simply be inappropriate and would jeopardise the position of the company.

19 In that context it seems to me, putting it at its lowest, that it is far from clear that the company has access to funds that would place it in a position at any time to make the payment to the plaintiffs upon which Mrs Frigger heavily relied for showing that the purposes of the appointment of the provisional liquidator had been achieved.

20 There is also the question, it seems to me, of when, on Mrs Frigger's own submissions, the conditions set by the source of the funds for the freeing of the term deposit (conditions which I would infer from the materials put before me in the affidavit of Mrs Frigger of 8 February as well as her further affidavit filed just before the hearing of 15 February with the undertaking at the end of that affidavit) would be fulfilled.

21 They depend, as I understand it, on the disposition of the application for a stay of proceedings. That of course represents an indefinite date. It may in fact be one that will arrive quickly or it may take some time, and it may indeed not precede but follow, at some remove, the disposition of the application of the appellant company for special leave to appeal to the High Court, an application which, as I understand it, is to be dealt with in March of this year, within the next four weeks.

22 The matter then of the company having the solvency to which s 95A of the Corporations Act refers is not clear. I accept of course that the funds or resources from which payment can be made are not limited to those of the company itself but include those to which it has access. It is for that reason that I have been focusing upon the terms of the access the company has to those funds.

23 Those funds are in the form of the term deposit, the terms of which I do not have but which I am prepared to accept allow for the funds in the term deposit to be paid out on the appropriate arrangement with the bank; an arrangement which would be one involving the giving up of a claim to interest on the funds. However, I further understand that it is not contemplated by the source of the funds, Mr Frigger, that those funds should be made available before the stay application, referred to in the further affidavit of 15 February 2010 of Mrs Frigger, is disposed of.

24 Mrs Frigger also drew my attention, through her affidavit of 8 February 2010, to the fact that there is support for a favourable view of the merits of the appeal before the High Court represented by the opinion of the provisional liquidator that it is not inappropriate to provide, as a contingent asset of the company, for a sum corresponding with proceeds of a successful appeal, and that that opinion was based on consultations with solicitors which the provisional liquidator had had.

25 I do not have the benefit of the opinions that the provisional liquidator received but I am prepared to accept that I have before me, as I did not have before me at the hearing of the original application for the appointment of the provisional liquidator, evidence of some import that there is a significant chance of success on the appeal to the High Court. It is not possible on the material before me to go any further than that.

26 However, that does not seem to me to supply the solvency, a serious doubt as to which was one of the concerns underlying the original appointment of the provisional liquidator. The resolution of the appeal before the High Court is, on the best outcome so far as the appellants are concerned, some time away. It awaits of course the grant of special leave, followed by argument on the appeal, followed by a determination of the appeal.

27 The submissions of Mrs Frigger in support of her chamber summons for interlocutory orders went, however, further than I have up to now indicated. The respect in which those submissions did so was Mrs Frigger's indication that the company at the hearing before me, at which the appointment of the provisional liquidator was made, had not in fact been properly represented at that hearing. This is so even though the company might have been formally represented by the liquidator appointed under the members' voluntary winding up then on foot. In particular, the liquidator had not properly opposed the appointment of the provisional liquidator.

28 It was a matter of some significance to me that the company was indeed represented at that hearing. It was not my understanding at that hearing that the company was not in a position to say, and though the liquidator, Mr Trinick, had not in fact said, that there were good reasons to continue with the members' voluntary winding up rather than to move to the appointment of a provisional liquidator.

29 I do not consider then that the ground having to do with the adequacy or otherwise of the liquidator, as a person conducting for the company its part of the proceedings for the appointment of the provisional liquidator, should give me reason to remove the provisional liquidator. Indeed, I note the necessity to grapple with difficult arguments as to the adequacy of the liquidation or the position of the liquidator under the members' voluntary winding up to which my oral reasons on 21 January 2010 are testament.

30 For all those reasons then, in my view the applicants have not made a sufficient case for the removal of the provisional liquidator. I should note however that there is presently pending the application for a stay referred to in Mrs Frigger's further affidavit of 15 February 2010. The outcome of that application may - and I stress may, not must - have a bearing on whether or not any future application with respect to the removal of the provisional liquidator might have some better chances of success. That would be for another such application.

31 Further, I understand that it is the intention of the Friggers, with legal representation, as was made plain to me at the hearing today, to make submissions at the hearing of the petition for winding up and insolvency against the granting of that petition and in favour of its dismissal. If that petition were dismissed, then it seems to me also that the matter of the continuation of the provisional liquidator might be raised in circumstances where there might be, and again I stress might be, a significantly greater chance of success in any such later application.

32 For all those reasons then I consider that the present interlocutory process should be dismissed. I will hear from the parties, including the provisional liquidator whose legal representative has been present both today and on the previous occasion, as to the appropriate orders as to costs.

PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2010] WASC 113 (15 February 2010)

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PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2010] WASC 113 (15 February 2010)