Federation Group Ltd (ACN 007 532 827) (in liq) - [2005] FCA 900

FEDERAL COURT OF AUSTRALIA
Federation Group Ltd (ACN 007 532 827) (in liq) [2005] FCA 900
CORPORATIONS – company wound up – request to Supreme Court of British Columbia – jurisdiction in ‘an external administration matter’ – s 580 of the Corporations Act 2001 (Cth) – letter of request seeks orders based on declaration made in the Federal Court of Australia
Corporations Act 2001 (Cth), ss 436C, 445E, 446A(4), 471B, 580, 581(4)
Joye v Beach PetroleumNL and anor (1996) 67 FCR 275 followed
Re Crust ‘n’Crumb Bakers (Wholesale) Pty Ltd [1992] 2 Qd R 76 cited
Re AFG Insurance Ltd (Administrators Appointed) [2002] 43 ACSR 60 followed
IN THE MATTER of ss 580(C) and 581(4) of the Corporations Act and IN THE MATTER of FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION) EX PARTE FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION) and BRYAN KEVIN HUGHES and VINCENT ANTHONY SMITH AS LIQUIDATORS OF FEDERATION GROUP LTD (IN LIQUIDATION)
WAD 132 OF 2005
SIOPIS J
3 JUNE 2005
PERTH

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 132 OF 2005

BETWEEN:

IN THE MATTER of ss 580(c) and 581(4) of the CORPORATIONS ACT AND IN THE MATTER of FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION)

EX PARTE

FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION)
FIRST PLAINTIFF

BRYAN KEVIN HUGHES and
VINCENT ANTHONY SMITH AS LIQUIDATORS OF FEDERATION GROUP LTD (IN LIQUIDATION)
SECOND PLAINTIFFS

JUDGE:

SIOPIS J

DATE OF ORDER:

3 JUNE 2005

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

A declaration that on 30 May 2005, and by a resolution of creditors passed under s 445E of the Corporations Act 2001 (Cth):
1.1 the first plaintiff (Company) was wound up;
1.2by virtue of section 446A(4)(a)(ii) of the Corporations Act, Bryan Kevin Hughes and Vincent Anthony Smith were appointed as liquidators of the Company, with such powers and functions as conferred on them by the Corporations Act.
An order that the registrar sign, seal and dispatch to the proper officer of the Supreme Court of British Columbia, a letter of request in the following terms:
‘The Federal Court of Australia hereby requests the Supreme Court of British Columbia to assist this Court by making orders, to the extent the Supreme Court of British Columbia has jurisdiction so to order, as follows:
(1)Orders recognising and giving effect to the declarations made by the Federal Court of Australia on 3 June 2005 as follows:
(a)A declaration that on 30 May 2005, and by a resolution of creditors passed under section 445E of the Corporations Act:
(i) the first plaintiff (Company) was wound up;
(ii)by virtue of section 446A(4)(a)(ii) of the Corporations Act, Bryan Kevin Hughes and Vincent Anthony Smith were appointed as liquidators of the Company, with such powers and functions as conferred on them by the Corporations Act.
(2)Such orders as it would be open to the Federal Court of Australia to make within its jurisdiction applying and giving effect to the statutory provisions set out in the Act or orders applying and giving effect to such comparable Canadian statutory provisions in respect of such protections, entitlements, transactions or dealings as would have had application to the Company had it been made subject to a winding up order or similar order under Canadian insolvency law.
(3)Such orders as it would be open to the Federal Court of Australia to make within its jurisdiction to assist the liquidators in the exercise of their powers and the discharge of their functions as liquidators appointed pursuant to section 446A(4)(a)(ii) of the Act.
(4)Such further and other orders as the Supreme Court of British Columbia may consider just.’
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

WAD 132 OF 2005

BETWEEN:

IN THE MATTER of ss 580(c) and 581(4) of the CORPORATIONS ACT AND IN THE MATTER of FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION)

EX PARTE

FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION)
FIRST PLAINTIFF

BRYAN KEVIN HUGHES and
VINCENT ANTHONY SMITH AS LIQUIDATORS OF FEDERATION GROUP LTD (IN LIQUIDATION)
SECOND PLAINTIFFS

JUDGE:

SIOPIS J

DATE:

3 JUNE 2005

PLACE:

PERTH

REASONS FOR JUDGMENT

This is an application in which two items of relief are sought. Firstly, the plaintiffs seek declarations that on 30 May 2005 and by resolution of creditors passed under s 445E of the Corporations Act 2001 (Cth) (‘the Act’) the first plaintiff was wound up, and that by virtue of s 446A(4)(a)(ii) of the Act Bryan Kevin Hughes and Vincent Anthony Smith were appointed as liquidators of the first plaintiff with such powers and functions as conferred on them by the Act. Secondly, the plaintiffs seek an order that the registrar sign, seal and dispatch to the proper officer of the Supreme Court of British Colombia a letter of request in the following terms:
‘The Federal Court of Australia hereby requests the Supreme Court of British Columbia to assist this Court by making orders, to the extent the Supreme Court of British Columbia has jurisdiction so to order, as follows:
(1)Orders recognising and giving effect to the declarations made by the Federal Court of Australia on 3 June 2005 as follows:
(a)A declaration that on 30 May 2005, and by a resolution of creditors passed under section 445E of the Corporations Act:
(i) the first plaintiff (Company) was wound up;
(ii)by virtue of section 446A(4)(a)(ii) of the Corporations Act, Bryan Kevin Hughes and Vincent Anthony Smith were appointed as liquidators of the Company, with such powers and functions as conferred on them by the Corporations Act.
(2)Such orders as it would be open to the Federal Court of Australia to make within its jurisdiction applying and giving effect to the statutory provisions set out in the Act or orders applying and giving effect to such comparable Canadian statutory provisions in respect of such protections, entitlements, transactions or dealings as would have had application to the Company had it been made subject to a winding up order or similar order under Canadian insolvency law.
(3)Such orders as it would be open to the Federal Court of Australia to make within its jurisdiction to assist the liquidators in the exercise of their powers and the discharge of their functions as liquidators appointed pursuant to section 446A(4)(a)(ii) of the Act.
Such further and other orders as the Supreme Court of British Columbia may consider just.’
I deal firstly with the declarations. The plaintiffs rely upon affidavits of Mr Bryan Kevin Hughes sworn on 24 May 2005, an affidavit of Wayne Cole Zappia also sworn on the same day, and an affidavit of James Edward Scavell sworn on 3 June 2005. On the basis of the evidence which emerges from those affidavits, I am satisfied that the declarations which are sought in par 1 of the relief can be made.
I now turn to the second item of relief, which is the application made under s 581(4) of the Act. That subsection reads as follows:
‘The Court may request a court of an external Territory or of a country other than Australia, that has jurisdiction in external administration matters to act in aid of, and be auxiliary to, it in an external administration matter.’
I need to mention very briefly the factual background of this matter. On 23 October 2003 a secured creditor of the first plaintiff appointed the second plaintiffs as joint and several voluntary administrators of the first plaintiff under s 436C of the Act. On 10 December 2003 the first plaintiff and the second plaintiffs executed a deed of company arrangement by which the second plaintiffs became the joint and several administrators of the deed.
During the time in which the first plaintiff was under the deed of company administration, default judgment was obtained against the first plaintiff in Canada in the Supreme Court of British Columbia by a company VRB Power Systems Incorporated (‘VRB’). The amount of the judgment was CAD 226,980.86. On 22 February 2005, the second plaintiffs learned that unless the judgment debt was paid within 30 days certain shares in the company VRB belonging to the first plaintiff were to be sold by bailiffs in Canada pursuant to a writ of seizure and sale. The shares comprise a substantial asset of the first plaintiff. There is differing evidence as to the valuation of the shares but on at least one valuation the shares are worth over AUD 4 million.
As a consequence of finding out that one of the major assets of the first plaintiff was the subject of potential seizure pursuant to the writ of seizure and sale, the second plaintiffs have instructed Canadian solicitors to bring an application before the Supreme Court of British Columbia to enjoin any further steps being taken in relation to the execution against the shares and also to bring an application for the setting aside of the default judgment. These applications are now pending before the Supreme Court of British Columbia.
I might add that prior to the issue of the writ of seizure and sale, the second plaintiffs advised the solicitors acting on behalf of the judgment creditor that under Australian law a moratorium in respect of the enforcement of claims applied where a company was subject to a deed of company arrangement. However, notwithstanding that knowledge, the bailiffs, on the instructions of the judgment creditor, advised the second plaintiffs that they intended to take further steps to execute against the shares in Canada. The shares are subject to escrow conditions and cannot be transferred to any potential transferee without the consent of the Toronto Stock Exchange.
I now turn to consider the application made under s 581(4) of the Act in light of those facts. Section 581(4) of the Act provides that this Court may request a foreign Court to ‘act in aid of, and be auxiliary to, it in respect of an external administration matter’. An ‘external administration matter’ is defined in s 580 of the Act relevantly as follows:
‘External administration matter means a matter relating to:
(a) winding up, under this Chapter, a company…’
The scope of ‘an external administration matter’ and ‘winding up’ was considered in the case of Joye v Beach Petroleum NL and anor (1996) 67 FCR 275. In that case, the Full Court per Beaumont and Lehane JJ (at 287) approved the following definition of ‘winding up’ by McPherson SPJ in the case of Re Crust ‘n’ Crumb Bakers (Wholesale) Pty Ltd [1992] 2 Qd R 76 at 78:
‘…Winding up is a process that consists of collecting assets realising and reducing them to money, dealing with proofs of creditors by admitting or rejecting them and distributing the net proceeds after providing for the costs and expenses to the persons entitled…’
The Full Court went on to say (at 287‑288):
‘…in our opinion that any step taken by a liquidator in getting in the assets of the corporation is a step taken in winding up; and this is so whether or not the step involves litigation aimed at the recovery of the assets.’
I turn now, to consider the question of this Court's power to issue the letter of request in light of the requirement under s 581(4) that the aid of the Supreme Court of British Columbia be sought in relation to ‘an external administration matter’. In this regard, I adopt the approach of Barrett J in the case of Re AFG Insurances Ltd (Administrators Appointed) and anor (2002) 43 ACSR 60. In that case declarations were sought in relation to the status of the appointment of an administrator under the Act in conjunction with an application for the issue of a letter of request to the English court. His Honour made those declarations. In reference to those declarations he said (at 61):
‘Those declarations…once made will constitute orders of this court attracting in the particular circumstances of this case…a need for the English court to act in its jurisdiction in aid of and to be auxiliary to this court in recognising and giving effect to those orders.’
In my view, therefore, it is sufficient to satisfy the requisite part of s 581(4) of the Act that this Court has made the declarations which I have made. I note, however, that the decision of the Full Court in Joye v Beach Petroleum NL (above) recognises that it would not necessarily be required that there be orders or litigation in this Court for this Court to have the power under s 581(4) to issue a letter of request.
I turn now to consider whether the Supreme Court of British Columbia has jurisdiction in an external administration matter within the meaning of s 581(4). The Supreme Court of British Columbia has before it a matter in which a judgment creditor of the first plaintiff claims a right to execute against the assets of the first plaintiff. If the judgment creditor was allowed to proceed, this would affect the assets which would be available to the general body of creditors. Under s 471B of the Act the judgment creditor would not be entitled to proceed with enforcement processes in relation to that property except with the leave of a Court and in accordance with such terms if any as the Court imposes.
In my view, the process which is pending before the Supreme Court of British Columbia, comprising the competing claims of the judgment creditor and the second plaintiffs, falls within the definition of ‘winding up’ in that it relates to the getting in of assets, and the protection of the first plaintiff’s assets by the second plaintiffs. Therefore, I am satisfied that the Supreme Court of British Columbia has jurisdiction in an external administration matter within the meaning of s 581(4) of the Act. In my view, therefore, the requirements for s 581(4) of the Act have been satisfied and accordingly I will make the orders in par 2 of the application which is before me. I accordingly make orders in terms of pars 1 and 2 of the application before me.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.
Associate:
Dated: 30 June 2005

Counsel for the Plaintiffs: Mr T O Coyle

Solicitor for the Plaintiffs: Phillips Fox

Date of Hearing: 3 June 2005

Date of Judgment: 3 June 2005

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 132 OF 2005

BETWEEN:	IN THE MATTER of ss 580(c) and 581(4) of the *CORPORATIONS ACT* AND IN THE MATTER of FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION) EX PARTE FEDERATION GROUP LTD (ACN 007 532 827) (IN LIQUIDATION) FIRST PLAINTIFF BRYAN KEVIN HUGHES and VINCENT ANTHONY SMITH AS LIQUIDATORS OF FEDERATION GROUP LTD (IN LIQUIDATION) SECOND PLAINTIFFS
JUDGE:	SIOPIS J
DATE OF ORDER:	3 JUNE 2005
WHERE MADE:	PERTH

Counsel for the Plaintiffs:	Mr T O Coyle
Solicitor for the Plaintiffs:	Phillips Fox
Date of Hearing:	3 June 2005
Date of Judgment:	3 June 2005