Re Oliver Davey Glass (Pacific) Pty Ltd (in liq); ex parte Pattison [1999] VSC 241 (29 June 1999)

8. Until it ceased trading the Company carried on the business in Australia of installing curtain wall and façade cladding systems. In May 1998 it had one project only on foot. This was described as the University of New South Wales project. Façade provided substantial funds to enable the Company to perform its commitments in respect of this project. No further work was undertaken after May 1998. At this time, Mr Cremasco and his wife were the owners of a company, Minesco Industries Pty Ltd ("Minesco"), which carried on sub-contract work for the Company on certain of its projects, mainly the Melbourne Exhibition Centre and the Melbourne Crown Casino Complex.

11. In 1996 allegations of malfeasance were made against Mr Cremasco. It was said that he had improperly directed the Company's funds to the advantage of Minesco and himself. On 19 December 1997 the Company in proceeding number 8351 of 1997 sued Mr Cremasco and Minesco to recover these moneys. The sums involved are said to exceed $1M. Mr Cremasco denies these allegations.

14. On 23 May 1997 Mr Cremasco and Mr Paradiso resigned as director and secretary respectively of the Company and Mr Fahey and Mr Bertolli were appointed directors with Mr Bertolli as secretary. Mr Bertolli is a resident of Italy but spends a large proportion of his time working in Australia. A few days later, on 26 May 1997, Façade was registered.

17. In the ensuing 12 months, statutory demands were made upon the Company: in January 1998 by Minesco claiming $1,886,413.61; on 16 January 1998 by P.D. Australasia Pty Ltd ("PDA") claiming $431,572; and on 4 March 1998 by Minesco Industries (NSW) Pty Ltd claiming $741,205. These last two companies are also controlled by Mr Cremasco. I shall refer to the three companies, Minesco, PDA and Minesco (NSW) as "the Cremasco companies".

20. On 29 July 1998 the directors of the Company resolved that the Company was likely to become insolvent in the future and that the liquidator be appointed administrator. On 16 October 1998 the creditors of the Company resolved that it be wound up.

23. What is suggested against Façade is that under its management by Mr Fahey, the former director of the Company, it improperly acquired four contracts which the Company had or might have had on the following projects:

(a) University of New South Wales (new building) valued at $2.38M;

(b) Mercury Hotel Sydney valued at $1.38M;

(c) Ansett Terminal Sydney valued at $4.87M;

(d) Westpac, 360 Collins Street, Melbourne valued at $1.1M.

The total value of these contracts is said to be $9.7M and the expected profit 10 percent. Accordingly, the claim might be worth nearly $1M for the Company's creditors. The liquidator said that these allegations have indeed been made by Mr Cremasco but that no hard evidence has been provided by him despite numerous requests. It should be noted that Mr Cremasco has made similar allegations against Façade and Mr Fahey and others in proceeding number 7015 of 1998 brought by him on 28 August 1998. This proceeding, however, insofar as it concerns those two defendants has been stayed by order of Master Wheeler on 19 March 1999 for the plaintiff's failure to provide particulars of its allegations against them. Mr Fahey in his public examination in January 1999 said that he started work with Façade only towards the end of 1997 and that it started its first project at the beginning of 1998. Moreover, from the evidence of the liquidator it seems very unlikely that the Company had in the latter part of 1997 and thereafter sufficient working capital to carry out the four projects which it is said Façade improperly acquired.

30. The liquidator's position, stated shortly, was that he had no evidence himself against Facade and there were no funds available for him to carry out the enquiries necessary to determine whether the Façade allegations are well founded and to prosecute expensive litigation against that company. No creditor, including the Cremasco companies, has been prepared to put up the necessary funds. No litigation insurance is available. Moreover, it does not appear that Façade or Mr Fahey have assets sufficient to satisfy a substantial judgment against them. For practical purposes, then, the claims, even if well founded, are valueless.

33. And so in April 1999 the liquidator reached the agreement with Mr Fahey, Mr Bertolli and Façade to which I have referred. What the liquidator proposes is that he be permitted to enter into the deed of settlement so that he might use the funds or part of them to pursue the claims of the Company against Mr Cremasco and the Cremasco companies.

36. The committee of inspection considered the proposed settlement at a number of meetings in April and May 1999 but declined to approve it. They requested the liquidator to convene a meeting of creditors to consider it and this meeting was held on 31 May 1999. At this meeting 11 of the 12 creditors present in person or by proxy voted as follows on a motion to accept the settlement:

Of the four creditors against the motion three were the Cremasco companies and their value as shown ignores the fact that their proofs of debt were disputed. Omitting them, only one creditor with a value of $29,363 was against the motion.

41. Against this background the liquidator approaches the court seeking an order pursuant to ss. 511(1)(b) and 477(2A) approving the compromise contained in the deed of settlement. At conclusion of argument I indicated that I would make such an order and give my reasons later. These are my reasons.

44. On the material before the liquidator he is justified in concluding, as he does, that the interests of the creditors are best served by entering into the settlement. I have regard to his opinion on this matter: State Bank of New South Wales v Turner Corporation Ltd (1994) 14 ACSR 480 at 483, per Tamberlin J. He has no funds to investigate or prosecute the claim against Façade or the former directors. I do not in the circumstances of this case consider that the law should require him, at his own expense, to obtain the opinion of counsel: compare Re Chase Corporation (Australia) Equities Pty Ltd [1989] FCA 530; (1990) 8 ACLC 1,118 (SC of NSW).

47. The weight which the court will normally give to the wishes of creditors whose money is at risk must have regard to the particular interests of the Cremasco companies in this case. I do not suggest that they acted in any way improperly in opposing the settlement. Creditors are, after all, entitled to have regard to their own commercial interests. But the existence of these interests causes me to be cautious in treating their votes as representing the interests of the creditors as a whole.

50. When the case was first called on the solicitor for the Cremasco companies announced that he neither consented nor opposed the application. Later, he firmed his position to one of opposition. He asked for time to place before the court material showing that the Façade claim had prospects of success and that funds might be found for the purpose. His affidavit of 24 June 1999 does not advance either matter. I am satisfied that whatever suspicions might exist as to the conduct of Façade, the court should not gainsay the liquidator's opinion that it is not commercially practicable to require the creditors' funds to be expended in pursuing it further.

53. Accordingly application was granted and the orders sought by the liquidator were made.