Turk v Newmont

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2244/98 - JOHN R TURK & SONS (ARTARMON) PTY LTD v NEWMONT TELEVISION PTY LIMITED

1 HIS HONOUR: Newmont Television Pty Limited (In Liquidation) was wound up by order of the Court made on 26 October 1998. Christopher Wykes, who is an official liquidator, was appointed to be liquidator. 2 The company was registered in November 1993 and operated a business for the production of television programs from that time. As liquidator Mr Wykes has conducted investigations into the affairs of the company including communications with clients and suppliers, interview of directors, examination of the books of the company, discussion with the company's bankers and creditors and the conduct of an examination of certain persons, including the directors under ss 596A and 596B of the Corporations Law. 3 He has identified the major assets of the company at the time of winding up to be - (a) a potential preference action against a creditor for approximately $80,000; (b) a potential claim with respect to the transfer of the program called 'Bright Ideas' from the company to a related entity; and (c) a potential insolvent trading action against the directors of the company. 4 The total amount of the proofs of debt is approximately $1,426,436. In Mr Wykes' view, unless the legal proceedings referred to as assets of the company are successful and result in additional funds being received, there will be no dividend to the creditors in the liquidation. 5 The potential preference claim is disputed by the creditor. Mr Wykes' evidence is that a successful result in the insolvent trading claim and the action in relation to the transfer of 'Bright Ideas' would depend on there being sufficient assets of the defendants to those proceedings to make the legal proceedings viable in the interests of creditors. Mr Wykes has presented evidence to the effect that one of the directors who would be a defendant, Robert Delamont, and his company Delco Productions are without assets and he says he believes that the third potential defendant, Barry Newman, has insufficient assets to warrant commencement of proceedings against him. 6 Mr Wykes has received a proposal for a deed of company arrangement to be entered into pursuant to arrangements involving Mr Delamont and his company Delco Productions which could, if successfully implemented, result in the company receiving some payment over a period of three or four years. The payment would enable the company to make a distribution to creditors which is hoped to be in the vicinity of eighteen cents in the dollar. 7 In light of his legal advice and information available to him as to the financial circumstances of the potential defendants, Mr Wykes has formed the commercial judgment that the proposed deed of company arrangement may be in the interests of the creditors of the company subject to certain conditions. He therefore proposes, in order to give creditors the opportunity to consider the deed of company arrangement, that he be appointed under s 436B(2) as the administrator of the company, and he seeks the leave of the Court to permit that appointment to occur. 8 On 4 June 1999 a meeting of the committee of creditors in the liquidation of the company resolved that Mr Wykes be instructed to approach the Court for leave to appoint himself administrator under s 436B(2). The largest non-related creditor of the company, the Australian Taxation Office which is owed approximately $335,518, according to the evidence of Mr Wykes has no objection to his appointment as administrator and indeed its representative on the committee of inspection voted in favour of the motion to instruct him to approach the Court. Only one member of the committee of inspection, the representative of Bizreport Pty Limited, opposed the motion but that creditor has consented to representation on the committee of creditors should the proposed administration proceed. 9 The Australian Securities and Investments Commission has been informed by Mr Wykes of his intention to appoint himself administrator. ASIC was invited to attend the meeting of the committee of inspection held on 4 June 199. The evidence of Mr Wykes is that the representative of ASIC with whom he had been dealing told him that 'ASIC will attend the meeting if we believe it warranted', but ASIC did not attend. 10 Mr Wykes says that he is unaware of any inappropriate advantage which would be gained by his appointment as administrator. He draws attention to the understanding of the actions and history of the company and its directors and the company's affairs which he has gained in his position as liquidator and says, if he is appointed administrator, the company will have the advantage of saving costs which might otherwise be incurred by an administrator becoming familiar with the company's affairs and conducting investigations. 11 Finally, he says that before his appointment as liquidator by the Court he was unaware of the existence of and had no dealings with the company, its directors or related entities; and since his appointment he has formed no personal relationship with the directors and believes he would be able to perform the duties of an administrator independently and in the interests of creditors. 12 In these circumstances, I am persuaded that it is appropriate to make an order granting leave under s 436B(2) forthwith. The effect of my making the order is not to terminate or extinguish the liquidation. It will be necessary at a later stage for an application to be made to that effect, after the creditors have had the opportunity to consider a report from Mr Wykes as administrator and the proposed deed of company arrangement. The fact that a further application will be needed is relevant to the question whether the Court should insist that ASIC be given specific notice of the application. In my view it is sufficient that in the present circumstances ASIC was informed that a meeting of the committee of inspection would be held to consider the proposal to appoint Mr Wykes as administrator and was invited to attend that meeting and that at this stage the effect of my orders is merely to give the creditors the opportunity to consider the proposed deed of company arrangement in circumstances where a further application will need to be made to terminate the liquidation. While I believe that in the circumstances adequate notice has been given to ASIC of the present application, I propose to make a direction to the effect that ASIC be notified of today's order. 13 Generally the approach to be taken by the Court to an application for leave under s 436B(2) is explained in the judgment of Hodgson J in Deputy Commissioner of Taxation v Food Corp Pty Limited (1994) 13 ACSR 796. There his Honour said the main question is whether the liquidator is an appropriate person to be an administrator. 14 Given that Mr Wykes has had no association with the company and its directors before being appointed liquidator by this Court and that on his evidence he has not built up any personal relationship with directors after the appointment and that he has accumulated understanding of and information about the company in the performance of his duties as liquidator, I am persuaded that he is an appropriate person for that appointment. 15 Mr Wykes seeks ancillary orders along the lines of the orders made by Bryson J in The Cobar Mines Pty Limited (Receiver and Manager Appointed) (In Liquidation) (No 2661 of 1998, unreported, 18 December 1998). Subject to one modification, I am persuaded that the ancillary orders sought by Mr Wykes should be made. 16 The first ancillary order is to dispense with the meeting of creditors which would otherwise be required under s 436E within five business days of the appointment of the administrator. There are two reasons for making this order. The first is that the company has been the subject of a procedure, namely its liquidation, in which creditors have been given the opportunity to express their views and have appointed a committee of inspection which approves the present course of action. The second is that the orders which I shall make ensure that a meeting of creditors will be convened within a short period to consider the proposal for a deed of company arrangement and at that meeting creditors will have the option of deciding to continue with the liquidation. 17 The second ancillary order is that the present committee of inspection be the committee of creditors in the administration. The appointment of a committee of creditors is a matter which would normally be attended to at the meeting of creditors convened under s 436E. It seems to me that no useful purpose would be served in having that matter considered in the circumstances described above and that it is, therefore, appropriate that the existing committee should be given continuity in this way. 18 The third ancillary order is an order authorising Mr Wykes as administrator to convene what would normally be a second meeting of creditors in an administration, that is, the meeting under s 439A at a date earlier than the time contemplated by s 439A(2). In my opinion, it is strongly in the interests of creditors that the proposed deed of company arrangement be presented to them expeditiously and in my view it would be inappropriate to require them to wait until the expiration of the time specified in s 439A(2) and (5). 19 I therefore propose to authorise the administrator to convene the meeting earlier but my intention is to go further. It seems to me in this case appropriate to direct the administrator that the meeting be convened on or before a specified early date. Mr Wykes has no objection to that course of action and accordingly my order will direct that the meeting be convened to be held on or before Friday 18 June 1999. 20 I make orders in terms of paragraphs 1, 2 and 3 of the Notice of Motion. I make an order in terms of paragraph 4 adding the words 'and I direct that the meeting be convened to be held on or before Friday 18 June 1999'. 21 I note the undertaking of the applicant's solicitor to notify the Australian Securities and Investments Commission of the contents of these orders.

Last Modified: 06/24/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.