Australian Securities and Investments Commission v Merlin Diamonds Limited

The Australian Securities and Investments Commission (ASIC) applied for the appointment of provisional liquidators to Merlin Diamonds Limited (Merlin) pending the hearing of a winding-up application. The application was brought pursuant to ss 464 and 651(1)(e) and (k) of the Corporations Act 2001 (Cth). The legal issues the Court had to decide were whether there was a reasonable prospect that a winding up order would be made and whether there was sufficient reason for intervening pending the hearing of the winding up application. The Court held that the evidence presented by ASIC demonstrated that there was a reasonable prospect that a winding up order would be made on the hearing of ASIC’s principal application. The Court was satisfied of this because ASIC had established a strong prima facie case that Merlin was, or had until recently been, contravening various provisions of the Act. Furthermore, the nature of those contraventions was such as to lead to a justifiable lack of confidence in the conduct and management of Merlin’s affairs. The Court was also satisfied that there was sufficient reason for intervening pending the hearing of the winding up application. Accordingly, the Court ordered that Salvatore Algeri and Timothy Norman of Deloitte Financial Advisory Pty Ltd be appointed as joint and several provisional liquidators to Merlin. The provisional liquidators were required to send notices of their appointment to each creditor and each member of the company. The Court also ordered that ASIC provide the provisional liquidators with access to and copies of the documents held by ASIC in relation to certain persons and entities. The provisional liquidators were required to provide a report to the Court and to ASIC as to the provisional liquidation of Merlin, including opinions as to the solvency of the company, the value of its assets, the likely return to creditors, whether the company had proper financial records and whether the company had contravened any provisions of the Act. The provisional liquidators were also required to investigate and report on any other matter referred to in the affidavit of Brendan Francis Caridi sworn 8 May 2019. The costs of the application to appoint provisional liquidators were reserved.