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Judgment - ex tempore

1. By Originating Process filed by leave on 6 January 2015, Mr Charlie In, who is a director of OGL Resources Limited ("Company"), seeks an order that the Company be wound up under the Corporations Act 2001 (Cth), and that Messrs Prentice and Sampson be appointed as liquidators of the company.
2. The application is supported by several affidavits. Mr In gives evidence that he is a director of the Company, and it appears from a company search that he is now one of the two remaining directors, three directors having resigned in the recent past. He gives evidence that the Company was incorporated in the Isle of Man on 8 April 1987 and has been a publicly listed company on the Australian Stock Exchange, and also had its securities traded on the Singapore Stock Exchange, but its securities are currently suspended from trading both on ASX and the Singapore Stock Exchange. He gives evidence of substantial creditors, including bond creditors totalling in excess of $2.3 million and unsecured creditors totalling in excess of $1.8 million. He also gives evidence that winding up proceedings have been commenced against the Company in the Supreme Court of Queensland, and indicates that the Company has not complied with a creditor's statutory demand on which those proceedings are based, and expresses the view that the Company is insolvent and cannot pay its debts.
3. Mr In also refers to a meeting of directors which resolved to appoint Messrs Prentice and Sampson as administrators of the Company and there is other evidence of the conduct of the administration, including a first meeting of creditors which took place on 10 December 2014. There are two difficulties with the appointment of the administrators. The first difficulty is that it appears that the requirement as to the minimum number of directors of the Company under its constitution was not satisfied, at the time the resolution to appoint the administrators was passed, but that the matter might really have been addressed, had the appointment of administrators otherwise been available, by an order under s 447A of the Corporations Act. The second and more fundamental difficulty with that appointment, which has led Mr In to bring this application, is that the Company is not a company incorporated in Australia, or otherwise falling within the definition of "company" in s 9 of the Corporations Act to which Part 5.3A of the Corporations Act applies. The administrators have formed the view, with the benefit of legal advice, that the appointment of administrators was therefore not one which could properly be made under Part 5.3A of the Corporations Act. There is no reason to doubt the correctness of the advice which they have been given, and indeed, it seems to be plainly correct.
4. Mr Prentice, who was one of the administrators purportedly appointed to the company, in turn gives evidence as to the conduct of the administration. In particular, the administrators obtained a report from the Company's directors and provided their report to creditors in respect of the first meeting of creditors. Mr Prentice expresses the view, consistent with that advanced by Mr In, that his investigation confirms that the Company is insolvent. He also refers to the proceedings for winding up of the Company brought in the Supreme Court of Queensland. There is evidence of the conduct of the first meeting of creditors held on 10 December 2014, and the list of persons who were admitted to vote as creditors indicate that the Company's debts are substantial, with debts in the order of $2.5 million having been admitted to voting, in circumstances that the Company's assets appear to be in the order of approximately $53,000. There was discussion at the meeting of the possibility that the appointment of administrators had been invalid, albeit by reasons of the provisions of the Company's constitution as to the minimum number of directors, rather than the fact that the Company was not incorporated in Australia, but the administrators had foreshadowed, at that meeting, the possibility that an application may be made for the appointment of a provisional liquidator if their appointment as administrators was not valid. In those circumstances it seems to me that creditors were on notice of the possibility of an application of this character, albeit that the application is now made, given the evidence of the Company's insolvency, for the appointment of a liquidator rather than a provisional liquidator.
5. A company search of the Company is in evidence, albeit that the timing of that search does not strictly comply with the requirements of the timing of such search under the Supreme Court (Corporation) Rules 1999 (NSW). I will dispense with the need for strict compliance with those rules under rule 2.4.
6. The solicitors acting for the party that has brought the winding up proceedings in the Supreme Court of Queensland have confirmed that that application is to wind up the Company in insolvency and that the applicant in those proceedings does not oppose the application for the appointment of a liquidator in this Court. Mr Johnson, who appears for Mr In, submits, and I accept, that that excludes any possibility of abuse of process by this application, and it also indicates that there is no risk that an inadvertent appointment of more than one insolvency practitioner to the company might occur because the plaintiff in the Queensland proceedings is on notice of this application.
7. Messrs Prentice and Sampson have consented to their appointment as liquidators, although Mr Johnson properly draws attention to the fact that they would require the leave of the Court for appointment under s 532 of the Corporations Act, either on the basis that they are likely to have incurred claims against the Company in an amount exceeding $5000 during the period of their appointment as purported administrators, or on the basis that they would have fallen within the definition of "officer of the company" so far as they were performing managerial functions in their capacity as the persons appointed, or purportedly appointed, as administrators of the Company. I am satisfied that it would be appropriate to grant leave to Messrs Prentice and Sampson to be appointed as liquidators, under s 532 of the Corporations Act, if an order for the Company's liquidation is made. There are two reasons to take that view. First, as Mr Johnson points out, the Company has limited assets, and the work which they have undertaken would be wasted if a new liquidator was appointed, who was required to undertake much of that same work again. Second, there is little reason, in the relevant circumstances, to think that the role which Messrs Prentice and Sampson have undertaken, as administrators of the Company, would be inconsistent with the independence which would be required of them as a liquidator, and I note that creditors had, by majority, approved there appointment as administrators of the Company at the first meeting of creditors. In this case, to the extent that there is any conflict between the need for economy and efficiency in the conduct of the liquidation, and the need for independence of the liquidator, which seems to be marginal in any event, I would adopt the view taken by Justice Young in Sutherland v Take Seven Group Pty Ltd (1998) 29 ACSR 201 where his Honour held that in the particular circumstances economy should be preferred. Leave of the Court should be granted under s 532 of the Corporations Act for the appointment of Messrs Prentice and Sampson as liquidators.
8. The remaining question is whether an order for winding up should be made. Section 583 of the Corporations Act provides that relevantly, a Part 5.7 body may be wound up under Chapter 5 which applies, with such adaptation as are necessary, including that a Part 5.7 body may be wound up if it is unable to pay its debts or the Court is of the opinion that it is just and equitable that it be wound up. The term "Part 5.7 body" is in turn defined in s 9 of Corporations Act as including a registrable body that is a foreign company and is registered under Division 2 of Part 5B.2 of the Corporations Act. I am satisfied that the Company is such a body and that s 583 applies. I am also satisfied that the Company is unable to pay its debts, having regard to Mr In's evidence of that matter, as corroborated by the administrator's investigation.
9. Mr Johnson draws attention to the question of standing to bring the relevant application and, in particular, points to the fact that, so far as Chapter 5 applies to the Company as a Part 5.7 body, s 459P(2) allows a winding up application to be made by a director, such as Mr In, with the leave of the Court. The Court may grant such leave under s 459P(2) if it is satisfied that there is a prima facie case that the Company is insolvent, but not otherwise. I am satisfied that there is such a prima facie case, and indeed that the evidence supports the conclusion that the Company is insolvent as a matter of fact. Accordingly leave should be granted to Mr In to bring the application, to the extent such leave is required, and Mr In therefore has standing to bring the application. I note it is not necessary to determine an interesting question, which might otherwise have arisen, whether Mr In would also have had standing to make an application on the basis that it was just and equitable that the Company should be wound up, which is an alternative ground for winding up under s 583 of the Corporations Act.
10. Finally, Mr Johnson fairly draws attention to the fact that requirements for notice to the Australian Securities and Investments Commission (ASIC), and advertising of the application, have not been complied with, or at least have not been complied with in full. He seeks an order that the Court dispense with the requirements of such notification and advertising under s 467(3) of the Corporations Act, which allows the Court to give such directions in proceedings as it thinks fit, and dispense with any notices being given or steps being taken that are required by the Corporations Act, or the rules, or any prior order of the Court. I have referred to the fact that an application, at least of this general character, was foreshadowed to creditors at the first meeting of creditors in the purported administration, and it seems to me that the creditors would not be disadvantaged, and indeed are likely to be advantaged, by the appointment of a liquidator to bring regularity to the Company's position. It also seems to me that there are compelling practical reasons to make a winding up order sooner rather than later, given the fact of the Company's insolvency, and that the delay which would be involved in notice to ASIC and advertising would not be warranted by any benefit which would be obtained from that course in the relevant circumstances. For that reason, I will dispense with such requirements, to the extent they have not been complied with, under s 467(3) of the Corporations Act.
11. In those circumstances, I am satisfied that the Court may properly make orders, for the winding up of the Company, and ancillary orders, including an order that the Company pay Mr In's costs of the proceedings which should be recoverable out of the assets of the winding up. Accordingly, I make orders in accordance with the short minutes of order, initialled by me, and placed on the file.
12. The Plaintiff has in turn provided a short form bill of costs in respect of its costs of the application, which relate to the work done in preparing the application, to the two attendances in the Court, initially on 23 December 2014 when the matter was first mentioned in the duty list, and again today when it was heard. The amount claimed is in the order of $3,677 for professional costs, albeit those costs have been quantified at the Federal Court scale, which provides some guidance as to the costs which are likely to be permitted on assessment. There are additional disbursements, including filing fees, search fees and the Court fees on a sealed order, and counsel fees. I am satisfied that the retainer of counsel was warranted given the complexity of the issues in the application which required a degree of careful attention.
13. This Court has often noted, in its Corporations jurisdiction, the desirability of making short form costs orders in winding up applications to avoid delays and additional costs which may be incurred in assessment. Although the amount of costs claimed is perhaps slightly larger than might be seen in an ordinary winding up matter, the complexities involved in a winding up application involving a foreign company in circumstances such as the present are plainly greater than those which would be involved in such other application. I am satisfied that this is a proper case in which to make an order that the costs of the winding up application be quantified, in accordance with the Plaintiff's short form bill of costs at $9,589.47, and I so order.