Shaw, in the matter of B & V Lynch Pty Ltd v B & V Lynch Pty Ltd

REASONS FOR JUDGMENT 1 On 18 August 2015, I made the orders herein and said I would provide reasons for judgment later. Here are the reasons. 2 By this application, Mr Cameron Hugh Shaw and Mr Richard Albarran apply for orders, to be granted nunc pro tunc, pursuant to s 490(1) of the Corporations Act 2001 (Cth), for the defendant company, B & V Lynch Pty Ltd (the company), to be wound up voluntarily on 20 April 2015 and for the plaintiffs to be appointed as joint and several liquidators on and from that date. Mr Shaw and Mr Albarran are principals of the firm, Hall Chadwick. 3 On 20 April 2015 at 5:00 pm, an extraordinary general meeting of the company resolved that the company was, or may be, unable to pay its debts as and when they fell due, that the company be wound up voluntarily and that Mr Shaw and Mr Albarran be appointed as joint and several liquidators for the purpose of winding up the company. The company acted as trustee for the Lynch Family Trust. 4 The meeting also passed a resolution that the remuneration of the voluntary liquidators from the date of appointment of the voluntary liquidators to the completion of the liquidation, be approved in an amount equal to the cost of time spent by the voluntary liquidators and their partners and staff calculated at the Hall Chadwick hourly rates up to a maximum of $30,000 plus GST beyond which further creditors' approval might be sought and the voluntary liquidators be authorised to draw the remuneration on a monthly basis or as required. 5 Unbeknown to Mr Shaw and Mr Albarran, the Deputy Commissioner of Taxation (the Deputy Commissioner) had on 10 April 2015, commenced an application for the winding up of the company on the basis that it had failed to comply with a statutory demand issued by the Deputy Commissioner. 6 On 22 April 2015, a senior accountant employed by Hall Chadwick, Mr Dario Musulin, telephoned the law firm, Gadens Lawyers (Gadens), who was acting on behalf of the Deputy Commissioner in relation to the statutory demand and advised Gadens of the appointment of Mr Shaw and Mr Albarran as voluntary liquidators of the company. 7 On 22 April 2015, the voluntary liquidators produced a report to creditors and circulated the report to the Deputy Commissioner and all other creditors of the company of whom they were aware. Mr Shaw gave notice to the creditors that the first meeting of the creditors of the company would take place on 1 May 2015. 8 On 23 April 2015, the voluntary liquidators terminated the employment of all of the employees of a related entity of the company. Further, the voluntary liquidators conducted an urgent assessment of the ongoing viability and trading position of the company and determined that the company could no longer continue as a going concern and the voluntary liquidators ceased trading the business on 23 April 2015. 9 On 30 April 2015, Mr Musulin of Hall Chadwick received a letter from Gadens in which they advised that the Deputy Commissioner had applied to wind up the company and the application was listed before the Federal Court on 27 May 2015. That was the first time that Mr Shaw and Mr Albarran became aware of the fact that the Deputy Commissioner had already filed an application for winding up the company. The letter from Gadens also advised that Gadens were instructed to apply for the application for the winding up to be dismissed and the Deputy Commissioner's costs to be fixed in the amount of $4,670 to be paid by the company. 10 The voluntary liquidators held the first meeting of creditors on 1 May 2015. 11 At that meeting, the Deputy Commissioner was represented by general proxy, and the creditors resolved not to replace Mr Shaw and Mr Albarran as voluntary liquidators, to approve their remuneration up to a maximum amount of $30,000 plus GST calculated in accordance with the Hall Chadwick hourly rates and increased at a rate of 10% as at 1 July each year and that the voluntary liquidators be authorised to draw remuneration on a monthly basis or as required. A committee of inspection was not appointed. 12 Following the meeting of creditors, Mr Shaw and Mr Albarran carried out further work in liquidation of the company. They formally demanded debtors of the company to arrange payment to the voluntary liquidators or substantiate any disputes. Further, the voluntary liquidators wrote to all known holders of securities registered on the Personal Property Securities Register and requested them to discharge the securities if their claims were no longer valid. The voluntary liquidators also received claims from creditors in respect of lost deposits and transactions unfulfilled by the company prior to the voluntary winding up. The voluntary liquidators have also notified certain customers of the company to finalise sale of any completed or substantially completed work in progress. The voluntary liquidators have also disclaimed leases of two trading premises. 13 In addition, the voluntary liquidators engaged auctioneers and valuers of the plant and equipment of the company and the plant and equipment was auctioned on 26 May 2015. The voluntary liquidators have instructed the auctioneers not to release any auction proceeds until the Court has determined the outcome of this proceeding. 14 Mr Shaw deposed that it was only on about 26 May 2015 that he became aware of the restrictions imposed by s 490(1) of the Corporations Act on a company resolving to be wound up voluntarily when a winding up application has been filed. 15 Section 490(1) of the Corporations Act provides: Except with the leave of the Court, a company cannot resolve that it be wound up voluntarily if: (a) an application for the company to be wound up in insolvency has been filed; or (b) the Court has ordered that the company be wound up in insolvency, whether or not the order was made on such an application; or (c) the company is a trustee company (within the meaning of Chapter 5D) that is in the course of administering or managing one or more estates. 16 Initially, Mr Shaw and Mr Albarran sought to obtain the Court's leave under s 490(1) of the Corporations Act by way of an interlocutory application purportedly brought by them as interveners in the winding up proceedings brought by the Deputy Commissioner. I directed that Mr Shaw and Mr Albarran file an originating application seeking relief under s 490(1). On 29 July 2015, Mr Shaw and Mr Albarran filed the appropriate application. 17 It is well recognised that a court may grant leave under s 490(1) of the Corporations Act retrospectively. (See, Bredenkamp, in the matter of Rapid Fleet Rentals Pty Ltd (In Liq) [2014] FCA 1307, Re Horsham Kyosan Engineering Co Ltd [1972] VR 403.) 18 In my view, the plaintiff's application for leave under s 490(1) of the Corporations Act should be granted and their appointment as voluntary liquidators should be validated, rather than the Court making an order that the company be wound up compulsorily on the application of the Deputy Commissioner. 19 I have come to that view for the following reasons. 20 First, the petitioning creditor, the Deputy Commissioner, was aware from 22 April 2015 that the plaintiffs had begun acting as voluntary liquidators and the Deputy Commissioner acquiesced in that conduct by the plaintiffs. More particularly, the Deputy Commissioner through his solicitor was aware that the plaintiffs were continuing to act as voluntary liquidators, and on 1 May 2015, the Deputy Commissioner was represented at the meeting of creditors of the company that confirmed the appointment of the plaintiffs as voluntary liquidators. 21 Secondly, the Deputy Commissioner does not oppose the making of the orders sought by the plaintiffs. 22 Thirdly, there is no evidence that there is any recovery action which could possibly be affected by the relation back day not being established pursuant to the winding up application made by the Deputy Commissioner. 23 Fourthly, since 20 April 2015, the voluntary liquidators have undertaken a substantial amount of work including the sale of the assets of the company. The actions which the voluntary liquidators have undertaken have affected third parties, and were undertaken with the knowledge and acquiescence of the petitioning creditor. It is desirable, therefore, that those actions be validated. 24 Accordingly, I will make the orders sought by the plaintiffs. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.