CLC Corporation v Cambridge Gulf Investments Pty Ltd
[1998] FCA 1238
•10 SEPTEMBER 1998
FEDERAL COURT OF AUSTRALIA
CORPORATIONS LAW – provisional liquidators – matters relating to appointment - actions pending against company - company no longer trading - company insolvent - whether provisional liquidator should be appointed.
Corporations Law, s 472(1)
In Re Club Mediterranean Pty Ltd (1975) 11 SASR 48, applied
United States Surgical Corporation v Ballabil Holdings Pty Ltd (1985) 9 ACLR 904, applied
Rural Industries Cooperative Society Ltd v Porky Pigs Pty Ltd (1988) 12 ACLR 794, referred to
IN THE MATTER OF CAMBRIDGE GULF HOLDINGS NL (ACN 009 274 122)
CLC CORPORATION V CAMBRIDGE GULF INVESTMENTS PTY LTD
R D NICHOLSON J PERTH 10 SEPTEMBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 3026 of 1997
BETWEEN:
IN THE MATTER OF CAMBRIDGE GULF HOLDINGS NL (ACN 009 274 122)
CLC CORPORATION
APPLICANT
AND:
CAMBRIDGE GULF INVESTMENTS PTY LTD (ACN 009 274 122)
RESPONDENT
JUDGE:
R D NICHOLSON J
DATE OF ORDER:
10 SEPTEMBER 1998
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
Christopher Michael Williamson of, Chartered Accountant of Messrs Hall Chadwick, Level 20, AMP Tower, 140 St George’s Terrace, Perth in the State of Western Australia be appointed Provisional Liquidator to Cambridge Gulf Holdings NL (ACN 009 274 122) (the Company) until the making of a winding-up order herein or until further order.
The duties to be performed by the Provisional Liquidator are as follows:-
2.1 To take possession of, collect and protect the assets of the Company;
2.2 To receive and collect the debts due to the Company (save for sums held by any part subject to orders of this Court);
2.3 To discharge rents, wages, salaries and other current expenses of the Company, or for the purposes of subparagraph (d) hereof;
2.4 To carry on the business of the Company and of its subsidiaries until further order but so far as is necessary for the rearrangement, beneficial disposal or winding-up of that business;
2.5 To sell or otherwise dispose of, in any manner, all or any part of the property of the Company;
2.6 Generally to exercise such of the powers conferred on a liquidator by section 477(2)(a) to (k) of the Corporations Law as may be necessary for any of the foregoing purposes.
The Board members and secretary of the Company forthwith deliver up to the Provisional Liquidator all the books and records of the Company provided that the respondent shall have access to the same at the offices of the Provisional Liquidator during normal business hours for the purposes of responding to the winding-up application.
The Bank at which the provisional liquidator is to open a trust account is the ANZ Bank, 77 St Georges Terrace, Perth.
The costs of the application be costs in the petition.
The Provisional Liquidator have liberty to apply.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 3026 of 1997
BETWEEN:
IN THE MATTER OF CAMBRIDGE GULF HOLDINGS NL (ACN 009 274 122)
CLC CORPORATION
APPLICANT
AND:
CAMBRIDGE GULF INVESTMENTS PTY LTD
(ACN 009 274 122)RESPONDENT
JUDGE:
R D NICHOLSON J
DATE:
10 SEPTEMBER 1998
PLACE:
PERTH
EX TEMPORE REASONS FOR JUDGMENT
HIS HONOUR: This is an application for the appointment of a provisional liquidator in respect of the respondent until the making of a winding-up order or until further order. It requires the Court to approach the matter in accordance with subs 472(2) of the Corporations Law which provides:
“The court may appoint an official liquidator provisionally at any time after the filing of a winding-up application and before the making of a winding-up order or, if there is an appeal against a winding-up order, before a decision in the appeal is made.”
It is common ground the subsection gives to the Court a broad discretion to be exercised in all the circumstances of the case: In Re Club Mediterranean Pty Ltd (1975) 11 SASR 481 at 484. In argument it has been submitted for the applicant and is uncontested on behalf of the respondent that the discretion is similar to that arising on the application for an interlocutory injunction and the strength of the case, the final relief and the balance of convenience must be assessed. In short, there is a judicial discretion to be exercised.
The facts in this case, while not unique, nevertheless raise particular special considerations. They are short in compass. The first is that the respondent's only asset is the amount of $3,926,630.37. That sum was paid into the Court pursuant to orders on 31 August 1998. The respondent does not conduct a business. The respondent is taking advice in respect of the merits of a special leave application to the High Court of Australia in relation to an appeal from a decision given by the Full Court of this Court on 28 August 1998. The time allowed for the making of such application therefore expires on 25 September 1998. In addition, the respondent is involved in two Supreme Court actions.
There are a number of reasons why it is said on behalf of the respondent that a provisional liquidator should not be appointed by the Court. The first is that a winding-up application has been listed for further hearing on 23 September 1998. The second is that it is submitted nothing is likely to happen in the two Supreme Court actions between today and 23 September 1998. In support of this there is evidence from the solicitor for the respondent that he and his firm are instructed by the respondent to provide the solicitors for the applicant with a copy of any orders made in either of the Supreme Court actions prior to 23 September 1998 which would jeopardise the respondent.
There is evidence that a director of the respondent has agreed to pay the proper costs and disbursements incurred in respect of the Supreme Court actions in the period to which I have just referred. That, however, is not evidence of the director personally assuming the liability for those payments, nor does it appear that the agreement by the director is referable to any application for special leave.
Thirdly, it is submitted for the respondent that if the applicant's real concern is to obtain a stay of proceedings in the two Supreme Court actions, an application could be made pursuant to O 71 r 44 of the Federal Court Rules referred to in s 467(7) of the Corporations Law. This permits a creditor to apply to the court to stay or restrain further proceedings in an action after the filing of a winding-up application and before a winding-up order is made.
Next it is submitted for the respondent it is significant that it is being advised by senior counsel in relation to the special leave application. It seems to me to be open to inference that is the principal reason for the respondent opposing the application because it is the one continuing activity of which the Court has evidence, aside from the possibility that something may arise in the Supreme Court actions requiring action on behalf of the respondent.
It is also submitted for the respondent that if an application for special leave is made, then any application for winding-up or a provisional appointment can be made at that time in light of that development.
The case for the applicant focuses very significantly on the fact that there is a need for the applicant to investigate, through independent persons appointed by a provisional liquidator, whether there is merit inherent in favour of the respondent in any of the actions to which I have referred. Accordingly it is submitted for the applicant the following discretionary factors favour the appointment of a provisional liquidator as is sought.
The first is that, without contest, the respondent is heavily insolvent so it is open to inference, which I draw, that a winding-up order is highly probable. That inference is drawn at a stage after the respondent has had the decision of a Full Court of this Court dismissing its appeal.
Secondly, there is the entire absence of any undertaking or business activity which can suffer harm as the result of a provisional appointment.
Thirdly, there is an evident need for an independent third party to assess the future of the litigation. Fourthly, an independent judgment, it is submitted, should be made of the merits of the claims advanced in the two superior court proceedings. I read the third and fourth submissions as to the same effect.
It seems to me that it is highly material that both a winding-up order is highly probable and that an independent assessment of the merits of the litigation is in those circumstances the most just way for the rights of the respondent in that litigation to be determined. I am influenced to that view particularly by what was said by Needham J in United States Surgical Corporation v Ballabil Holdings Pty Ltd (1985) 9 ACLR 904 at 908 where his Honour said :-
“The question then is whether the provisional liquidator should be appointed. The relative positions of the company and of the plaintiff need to be considered. It is very much in the plaintiff’s interest that an independent person should examine, with the powers conferred on the provisional liquidators, the transaction of 29 March 1985. If that transaction were to be set aside, the defendant would be entitled not only to the restoration of its large holding of shares in HPL, but also to the recognition of a debt of $5 million by HPL, subject, no doubt, to allowance to HPL of the $1,600,000 paid over under the transaction.” No doubt the provisional liquidator would also consider the prospects of recovering from Blackman the amounts appropriated by him to part payment of what he apparently asserts is a debt owed to him by the defendant.
So far as the defendant is concerned, it seems to me that the appointment of a provisional liquidator would do it no harm – it is not carrying on any business and has no executives or directors in Australia. Further, it could be in its interests to have the 29 March transaction set aside, although obviously not in Blackman’s interests, even though that result could bring into existence another contingent or prospective creditor, namely, HPL. I have no evidence to allow me to make any estimate as to whether the claim by HPL could mature into a judgment which would exceed in amount what HPL received under the 9 March settlement. What the defendant lost, by that transaction, is clear; what it gained, if anything, is unclear. Blackman certainly gained almost $1,600,000.”
The decision in Rural Industries Cooperative Society Ltd v Porky Pigs Pty Ltd (1988) 12 ACLR 794 at 800 is to similar effect. In my view those considerations properly tip the balance of the exercise of judicial discretion in favour of the applicant.
Accordingly, I consider it is appropriate that an appointment of a provisional liquidator be made by the Court.
On behalf of the respondent it was stated that the proposed duties of the provisional liquidator are not ones which are likely to be required. While that may be true of the specific duties recited in the minute of order, the fact is that in par 2.6 of the minute there is also the power generally to exercise the powers conferred on a liquidator and it is those powers that will enable a provisional liquidator to assess, through seeking independent advice, the merits inherent in the respondent’s position, if any, in the litigation in issue.
For those reasons, I consider that the order should be granted subject to anything further which I may hear from either counsel on the form of the minute.
I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R D Nicholson
Associate:
Dated:
Counsel for the Applicant: Mr D M Stone Solicitor for the Applicant: Williams & Hughes Counsel for the Respondent: Mr M J Hayter Solicitor for the Respondent: M J Hayter & Co Date of Hearing: 10 September 1998 Date of Judgment: 10 September 1998
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