Fuji Xerox Australia Pty Limited v Tolcher

[2004] NSWCA 284

Reported Decision: 50 ACSR 402
60 NSWLR 696
(2005) 23 ACLC 34

Court of Appeal

CITATION:	FUJI XEROX AUSTRALIA PTY LIMITED v TOLCHER & ORS [2004] NSWCA 284
HEARING DATE(S):	9 August 2004
JUDGMENT DATE:	9 August 2004
JUDGMENT OF:	Spigelman CJ at 1, 18; Sheller JA at 16; Tobias JA at 17
DECISION:	Appeal dismissed
CATCHWORDS:	CORPORATIONS - Priorities in winding up - Meaning of "in any winding up" in s564 Corporations Act
LEGISLATION CITED:	Corporations Act 2001 (Cth) Bankruptcy Act 1966 (Cth) Companies (Unclaimed Assets and Moneys) Act 1963 (NT)
CASES CITED:	Energy and Resource Conservation Co Limited (In Liquidation) v Abigroup Contractors Pty Limited (1997) 41 NSWLR 169 Day and Dent Constructions Pty limited v North Australian Properties Pty Limited (1982) 150 CLR 85 BP Australia Ltd v Brown (2003) 58 NSWLR 322
PARTIES :	Fuji Xerox Australit Pty Limited Raymond George Tolcher National Australia Bank Limited Capital Finance Australia Limited
FILE NUMBER(S):	CA 40139/04
COUNSEL:	J T Johnson (Appellant) J Stoljar (Second Respondent) M Ashhurst (Third Respondent)
SOLICITORS:	Bartier Perry (Appellant) Piper Alderman (First Respondent) Malleson Stephen Jaques (Second Respondent) Kemp Strang (Third Respondent)

LOWER COURTJURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	3259/03
LOWER COURT JUDICIAL OFFICER :	Barrett J

- 3 -

40139/04

SPIGELMAN CJ
SHELLER JA
TOBIAS JA

Monday 9 August 2004

FUJI XEROX AUSTRALIA PTY LIMITED V RAYMOND GEORGE TOLCHER & 2 ORS

Judgment

1 SPIGELMAN CJ: The appeal before the Court is in a narrow compass. The issue arises under s564 of the Corporations Act 2001:

“Where in any winding up:

(a) property has been recovered under an indemnity for costs of litigation given by certain creditors, or has been protected or preserved by the payment of money or the giving of indemnity by creditors; or
(b) expenses in relation to which a creditor has indemnified a liquidator have been recovered;
the Court may make such orders, as it deems just with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk assumed by them.”

2 The Appellant and the second and third respondents received certain funds in priority, pursuant to a formula determined under s564.

3 The issue before the Court is whether or not certain expenditure incurred by the Appellant ought to have been included in the computation of the amount which it ought recover by the application of the formula determined by Barrett J pursuant to s564. The amount in question was an amount of some $103,700 which the Appellant paid out to meet the operations of an administrator appointed under Pt 5.3A of the Corporations Act to the affairs of the company, Lloyd Scott Enterprises Pty Limited.

4 Barrett J determined a number of issues in his judgment of 3 February 2004, including a determination, adversely to the Appellant, that the amount of $103,700 should not be incorporated into the formula for the purposes of the application of s564. His Honour’s reasons for his conclusion are set out in his judgment at pars [13]-[17] as follows:

“[13] Section 564 itself provides no explicit guidance as to the scope and meaning of “in any winding up” in a case such as the present where there was a preceding Part 5.3A administration. There is, however, one element of s.564 that provides some assistance: s.564(b) deals with the possibility that, “in any winding up”, a creditor may have indemnified “a liquidator” in relation to expenses. This suggests that the period in contemplation cannot begin until there is “a liquidator”.
[14] There is no such reference to “a liquidator” in s.564(a). There are, however, references to certain forms of activity in relation to the company’s property (recovery, protection and preservation) that are activities normally associated with a liquidator as such, rather than an administrator. In the case of a court ordered winding up, the liquidator is required by s.474(1) to take all the property of the company into his or her possession or under his or her control. There is no equivalent provision in relation to voluntary winding up but, as is noted at p.363 of McPherson’s “The Law of Company Liquidation” (4th edition, 1999, by Keay), it is implicit in the structure of the Corporations Act that the duty of collecting assets of the company is to be discharged by the liquidator in the case of voluntary winding up. Such a duty exists as part of the function of assembling a fund from which debts may be paid. Spigelman CJ observed in State Bank of New South Wales v Brown (2001) 38 ACSR 715 that it is in the public interest that all the assets of a company are available for creditors and that there is a public interest dimension in proceedings by a liquidator. Section 546 may be accepted as one of the means by which these public interests are promoted.
[15] The duties and functions of an administrator under Part 5.3A differ significantly from those of a liquidator. Such an administrator has control of the company’s business, property and affairs (s.437A(1)(a)) and may carry on the business and manage the property and affairs (s.437A(1)(b)). But an administrator does these things only to facilitate the investigation required by s.438A(a) and the assessment required by s.438A(b) so that creditors, guided by the administrator, may make a decision as to the company’s fate. One such fate may be winding up. Recovery, protection and preservation of the company’s property are not of themselves the direct concern of an administrator even though they may be to some extent incidental to due performance under s.437A.
[16] Section 564 is a provision of long standing in companies legislation. It existed in virtually identical form as s.450 of the Companies (New South Wales) Code and s.292(10) of the Companies Act 1961. Section 297(7) of the Companies Act 1936, inspired by s.84(2) of the Bankruptcy Act 1924 (Cth), made analogous provision where assets had been recovered by means of an indemnity for costs of litigation. Each such predecessor provision, like s.564 itself, employed the words “in any winding up”. The provision is thus one that has historically been confined to the regime of collection, realisation and application of assets presided over by a liquidator as such.
[17] I consider that the words “in any winding up” in s.564 refer to a situation where a liquidator is in office for the purpose of performing the statutory functions that liquidators perform. While Division 1A of Part 5.6 fixes the point at which a winding up is to be regarded as having begun or commenced, it does so for the purposes of provisions employing “begin”, “commence” and “relevant date”, each of which is given by s.9 a meaning derived from Division 1A of Part 5.6. If every context in which “in” was used in relation to a winding up was regarded as including any antecedent Part 5.3A administration, anomalous results would emerge. Had there been, at the time of the introduction of Part 5.3A in 1993, a legislative intention to extend the established operation of the long standing provision that is now s.564 so as to make it apply, in a subsequent winding up, to assistance given to an administrator in recovering, protecting or preserving property, it is reasonable to think that the intention would have been manifested by some means more explicit than an arguable effect of provisions defining the point of commencement of a winding up following on from such administration.”

5 In my opinion, his Honour was correct for the reasons his Honour gave.

6 The issue arises under s564 which I have set out above. The question is, what is encompassed within the provision insofar as it adopts the words “in any winding-up”. The Appellants rely on the terms of s513B and C of Div 1A of Pt 5.6, which establish that a winding-up is deemed to commence on the day on which the administration began.

7 The issue of statutory construction before the Court is whether the words “in any winding-up” in s564 refer to the period of time during which a winding up is deemed to have occurred, or whether those words should be understood as meaning, ‘in the course of and for the purposes of the winding-up’.

8 This is an issue that has arisen on other occasions. As McLelland CJ in Equity observed in Energy and Resource Conservation Co Limited (In Liquidation) v Abigroup Contractors Pty Limited (1997) 41 NSWLR 169 at 173:

“It has been a commonplace of company law that there is a clear distinction between the date of presentation of the petition” and “the date when the administration of the winding up commences, that is, the date of the winding-up order.” see Day & Dent Constructions Pty Ltd (In Liq) v North Australian Properties Pty Ltd (1982) 150 CLR 85 at 98-99 per Mason J.

9 Similar issues arise under section 513B and C of the Corporations Act as it now exists.

10 In Day and Dent Constructions Pty Limited v North Australian Properties Pty Limited (1982) 150 CLR 85 at 98-99, the court was concerned with the interpretation of s 86(1) of the Bankruptcy Act 1966 (Cth), which was made applicable to the winding-up of an insolvent company by s291 of the Companies Act 1963 (NT). That section concerned the existence of mutual credits, mutual debts and mutual dealings. The question turned on whether the time for ascertaining whether there were such mutual credits, debts and dealings was the date of the liquidation, namely the date on which the liquidation was deemed to commence, or whether it was the date of the winding-up order. For the reasons set out by Mason J at [98]-[99], it was held that the date of the winding-up order was the relevant time.

11 This is to similar effect to some of the observations I made in BP Australia v Brown (2003) 58 NSWLR 322 at 123-125, where I raised the possibility that the words, “relation back day” may have different meanings in different sections, depending on their context.

12 As in all of these matters, the question must be determined by the context and the purpose of the particular legislative provision under consideration.

13 The factors to which Barrett J gave particular attention in his Honour’s judgment and, in my opinion, the views his Honour expressed, were correct and are determinative of the proposition, that the words “in any winding-up” in the context of s564 do not refer to a period of time during which there can be said to have been a winding-up, but refer to facts and matters that occurred in the course of the winding-up.

14 His Honour directed attention to the specific reference to liquidator in par (b) of s564 and his Honour was correct to do so. Similarly, as his Honour noted, the acts referred to as triggering the ability of the court to make the subject orders in par (a), being acts of recovering property under an indemnity or protecting and preserving property by means of payment of money or indemnity from a creditor, are facts and matters that occur typically in the course of a liquidation, rather than in the course of an administration, where the focus of attention is on the carrying on of the business.

15 For these reasons, additional to those I have adopted of Barrett J, in my opinion, his Honour was correct. The appeal should be dismissed with costs.

16 SHELLER JA: I agree

17 TOBIAS JA: I also agree.

18 SPIGELMAN CJ: The order is as I have proposed.

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Last Modified: 09/20/2004