HIS HONOUR: On 4 June 2015, the plaintiff Wideform Pty Ltd filed an originating process seeking an order that the defendant Camarda & Cantrill Pty Ltd be wound up in insolvency and liquidators, whose consent has been obtained and tendered, appointed. Notice of the winding up application was lodged with ASIC on 5 June 2015 at 10.06 am but was not immediately recorded on the ASIC database and, indeed, does not appear yet to have been recorded on the database.
On 5 June 2015 at approximately 3.05 pm, the shareholders of the defendant, unaware of the winding up application, purported to resolve in general meeting that the company be wound up and that Messrs Tang and Hutchins of Cor Cordis Chartered Accountants be appointed liquidators. The purported voluntary winding up was a creditors' voluntary winding up, there being no declaration of solvency.
Mr Tang proceeded to carry out what he has described in his evidence as "initial tasks" in the winding up. That involved a measure of work which he describes in his affidavit as including land title searches, PPSR searches, dispatch of letters to secured parties, electronic letters to banks for the purposes of identifying and freezing company bank accounts, letters to utilities, notification to the ATO, opening a liquidation bank account, obtaining insurance, holding discussions with the company's solicitors and accountants in relation to its business property and affairs, identifying the creditors (including secured parties with secured interests), and identifying recent statutory demands served on the company. Mr Tang has received books and records of the company, including MYOB management accounts.
Upon becoming aware on 9 June 2015 of the proceedings filed in the Court, Mr Tang refrained from performing further work pending the outcome of an application for leave pursuant to (CTH) Corporations Act 2001, s 490, that the company be wound up voluntarily notwithstanding that a winding up application had been filed.
Section 490(1) relevantly provides that, except with the leave of the Court, a company cannot resolve that it be wound up voluntarily if an application for the company to be wound up in insolvency has been filed. However, it is well established that leave under s 490(1) may be granted retrospectively [Re Horsham Kyosan Engineering Co Ltd (1972) VR 403, 406 (Gowans J); Progress Printers and Distributors Pty Limited v Production and Graphics Communications Pty Limited (1996) 21 ACSR 241; Re Pendonna Pty Limited [2012] NSWSC 631, [2]].
As I observed in Re Pendonna, it has been said that it will be a rare case in which such an order will be made retrospectively, presumably because it is necessary for an applicant for such leave to establish that it is preferable that the company be wound up voluntarily rather than compulsorily, and it will often be difficult to establish that a voluntary winding up will be more in the interests of creditors than a compulsory winding up. Particularly in the case of a members' voluntary winding up, it will often be difficult to show that the interests of the creditors are promoted by a voluntary winding up, because in the context of a members' winding up, a liquidator does not have the same range of powers and remedies as one in a compulsory winding up.
However, where the winding up is a creditors' voluntary winding up, as distinct from a members' voluntary winding up, the powers of the voluntary liquidator do not differ markedly from those of a Court-appointed liquidator [Re Pendonna, [4]]. In such a case, it may well require less to establish that it will be in the interests of the creditors that the voluntary winding up proceed, rather than the company be wound up compulsorily. In a number of cases it has been recognised that even if the only consideration may be the saving of duplication of work and therefore costs in the administration, that may suffice to show that leave should be given retrospectively for the creditors' voluntary winding up, so long as there is no countervailing disadvantage in a voluntary winding up. Cases in which the avoidance of duplication of effort and therefore costs have been considered a relevant consideration include In the matter of U-Nited Warranties Pty Ltd [2012] NSWSC 1087 and Re Pendonna.
In so far as it is suggested that "special circumstances" must be shown, there is nothing in the statute which so requires. The test under s 490(1) must be, as I have foreshadowed, whether it is in the interests of the creditors - and perhaps the public - that the company be wound up voluntarily rather than compulsorily.
Ordinarily, it will also be relevant to consider whether the voluntary winding up has proceeded in the face of knowledge of the application for a Court ordered winding up or in ignorance of it, and if in ignorance of it, whether that has been despite all reasonable caution, or on the other hand, reckless to the possibility. In this case, it is clear that the appropriate searches were undertaken before the voluntary winding up was proceeded with, but due to no party's fault did not expose the pendency of the Court proceedings because, despite lodgement of notice with ASIC, that notice had not yet reached ASIC's computer database.
As to where the interests of creditors lie, the matter is very finely balanced. As Mr Tang, the voluntary liquidator, concedes, not a great deal of work has been undertaken, and work was put on hold on 9 June. Nonetheless, some measure of work, as I have described above, has been undertaken, and if the company were to be wound up compulsorily a new liquidator would necessarily have to duplicate at least some of that work. In avoiding that duplication, there is at least a measure of advantage to creditors in a voluntary winding up. Secondly, the originating process is not returnable until 7 July. It is, I suppose, conceivable that the Court could, in the light of the company's admitted insolvency, expedite the hearing, dispense with advertising and make a winding up order immediately, but that is not a usual process.
A voluntary winding up means that the liquidators will be able to act immediately, rather than there being no liquidator until 7 July. It seems to me again that there is a measure of advantage to creditors in that course, rather than in awaiting a compulsory winding up. Those advantages are, I readily accept, relatively slight. If there were any material disadvantage in a voluntary winding up, it would take little to outweigh those slight advantages to which I have referred; but counsel for the plaintiff has frankly been unable to identify any such advantage, other than the opposition of the plaintiff to that course.
Normally, in the context of a creditors' voluntary winding up, the significant potential advantage of a Court-ordered winding up may be an earlier relation back day, but in this case there would be a difference of one day only, which no one suggests is of any materiality.
The plaintiff is the largest unsecured creditor, but does not represent a majority of unsecured creditors. Some other unsecured creditors, though less in value than the plaintiff, have indicated at least non-opposition, if not support, for the voluntary liquidation continuing. I accept that the attitude of creditors is relevant, but the plaintiff's opposition would be of much more significance if it could be shown to be founded on any logical reason. No such reason has been advanced, either in evidence or in submissions.
In many ways, what the defendant has done is to give the plaintiff substantially what it was seeking in the proceedings, a month earlier than it would have obtained it by proceeding with the originating process. The defendant accepts that the plaintiff's costs of the proceedings should be provided for and given priority in the liquidation as if they were a petitioning creditor's costs.
In those circumstances, as it seems to me, there are advantages, albeit slight ones, for creditors in leave being granted for the company to resolve that it be wound up voluntarily and no disadvantage for them in doing so. It is therefore appropriate to grant the leave sought.
The Court therefore orders that:
1. Pursuant to Corporations Act, s 490(1)(a), the defendant Camarda & Cantrill Pty Limited have leave to resolve that it be wound up voluntarily notwithstanding that an application for the company to be wound up in insolvency had been filed as at the date of the resolution, namely 5 June 2015.
2. The originating process be dismissed.
3. The plaintiff's costs fixed in the sum of $4,000 be costs in the winding up and have priority as if they were the costs of the plaintiff on an application on which the defendant was wound up.
4. The defendant's costs of the interlocutory process be costs in the winding up.
[3]
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Decision last updated: 11 March 2016
Parties
Applicant/Plaintiff:
Progress Printers and Distributors Pty Limited
Respondent/Defendant:
Production and Graphics Communications Pty Limited