Stephen Richard O'Ryan v Gregory Ray Golding No.3 - [2019] NSWSC 1372 - NSWSC 2019 case summary — Zoe

Stephen Richard O'Ryan v Gregory Ray Golding No.3 - [2019] NSWSC 1372 - NSWSC 2019 case summary — Zoe

Golding informed me that he has filed a motion in the Court of Appeal for expedition of his appeal and for a stay of the winding up. It is returnable on Monday. For this reason, amongst others, I am giving these reasons ex tempore, so that they can be available for the Court of Appeal.
Mr J Hynes of counsel appeared for the liquidators. He provided me with written submissions and addressed orally.
Mr F C Corsaro SC appeared for the O'Ryans, supporting the application.
A letter from Freyberg was tendered stating that she will abide the decision of the Court. Plainly, she still supports the O'Ryans.
The liquidators read affidavits of Mr McInerney sworn 2 October 2019, 4 October 2019, and 9 October 2019. He was not cross-examined.
Golding appeared for himself once more. He led no evidence, and did not seek to cross-examine.
Golding does not challenge the power of the Court to make the orders sought, nor the mechanics of those orders. He does not challenge the appropriateness of the proposed appointees. He does not challenge the terms of the funding agreement. He accepts that the company remains in deadlock.
But, Golding opposes the orders. He provided me with written submissions and addressed orally. He accepts that the company is now insolvent, although he argues that its insolvency has been brought about by the winding up itself and the costs attendant on that process which would not otherwise have been incurred. His resistance to the application itself is that the costs of the process, including the strata conversion and building works, are uncertain, and are perhaps more than what would be the case without the intervention of the liquidation. That was, of course, always the case, and it will remain so until the process has run its course.
O'Ryan has, as he foreshadowed, offered to fund this application. He has already paid $105,356.00 to the liquidators. Plainly, these costs are to be properly incurred. Today's application is thus funded by O'Ryan alone, albeit on the footing that he will become an unsecured creditor of the company.
As one would expect, the liquidators have provided information about the company.
The liquidators may not appoint themselves as voluntary administrators without leave of the Court under section 436B(2G) of the Act. The main question on such an application is whether they are appropriate persons to be administrators: Re Cobar Mines Pty Ltd (rec & mgr apptd) (in liq) (1998) 30 ASCR 125.
The order for leave to appoint themselves as voluntary administrators is necessary because Article 17 of the company's constitution gives the directors exclusive power to raise levies, and the liquidators think that they do not have that power. I am satisfied that if appointed voluntary administrators, the liquidators will be able to exercise that power and that this case is appropriate for its exercise: cf, Re Dungowan Manly Pty Ltd (in liq) (2017) 124 ACSR 218 and Re Dungowan Manly Pty Ltd (in liq) [2018] NSWSC 1083 where, in materially different circumstances to these, Black J was not satisfied that a levy was justified.
As one would expect, they propose to keep shareholders informed and, from time to time, to source their views as to matters, for example, building and design elements. Rationally, they do not propose to establish a formal committee of shareholders to negotiate or discuss those matters because they are (in my view, justifiably) concerned that such a course will lead to further dispute and associated cost. They have provided a high level summary of what they expect will be required during the voluntary administration.
The liquidators have undertaken that they will undertake to the Court, in both capacities, if appointed, that they will not embark on a process of sale of the property without giving the O'Ryans, the Goldings, and Freyberg, 14 days' written notice.
In an exchange with Golding as to what would be his complaint, on the hypothesis that the proposed process was successful so that the strata conversion and the repairs were effected, his response was: "only cost". He reiterated (on being asked by me) what he told me on 12 September 2019, namely, that from the Goldings' side, lack of money is not the inhibiting factor.
As was submitted on behalf of the liquidators, the process which has begun has as its very purpose the preservation of the Goldings family home. The winding up is now nearly one month old.
The first meeting of creditors and a second meeting of creditors (in the time period specified in the Act) are of no utility, neither is any further investigation of the company's affairs (as required by the Act).
In all the circumstances, I have concluded that it is appropriate to make the orders sought and, added to these reasons for the reasons I gave on 3 October 2019 refusing a stay, that there should not be any delay in the making of these orders.
The Court made the following orders: 1. Pursuant to section 477(2B) of the Corporations Act 2001 (Cth) (Act) and section 90-15(1) of Schedule 2 - Insolvency Practice Schedule (Corporations), approval is given for John Edgar McInerney and Philip Campbell-Wilson as liquidators of the third defendant (Company) to enter into the Funding Agreement in the form appearing at page 4 of the affidavit of John Edgar McInerney sworn 9 October 2019. 2. Pursuant to section 436B(2)(g) of the Act, John Edgar McInerney and Philip Campbell-Wilson as liquidators of the Company have leave to appoint themselves as administrators of the Company. 3. Pursuant to section 447A of the Act, Part 5.3A of the Act is to operate as if there is: 1. no requirement that the administrators of the Company, appointed pursuant to the grant of leave in Order 2 (Administrators), convene the first meeting of creditors pursuant to section 436E of the Act; and 2. no requirement that the Administrators comply with section 438A of the Act. 1. Pursuant to section 439A(6) of the Act, the period within which the Administrators must convene the second meeting of creditors under section 439A(5) of the Act is extended to 31 March 2020. 2. Pursuant to section 447A of the Act, Part 5.3A of the Act is to operate in relation to the Company as if the meeting of creditors of the Company required to be convened by section 439A of the Act, may be convened and held at any time during the period as extended by Order 4 above, and the period of five (5) business days thereafter, notwithstanding the provisions of section 439A(2) of the Act. 3. There be liberty to apply to any person, including any party or parties to the proceedings or any creditor of the Company who can demonstrate sufficient interest to vary the orders sought on the giving of three days' notice to the Administrators, and to the Court. 4. The Administrators are to give notice of these orders to any party to the proceedings that does not appear at the hearing on 10 October 2019. 5. The costs of the Notice of Motion filed 4 October 2019 be costs in the winding up of the Company. 6. THE COURT NOTES THAT: 7. The Liquidators and Administrators undertake to provide the plaintiffs and the first, second and fourth defendant with 14 days' written notice of any intention to realise any real property of the Company.