Harris Scarfe Ltd (in Liq) (No 2) - [2007] SASC 211

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
Re: HARRIS SCARFE LTD (IN LIQ) (No 2)
[2007] SASC 211
Judgment of The Honourable Justice Debelle
8 June 2007
CORPORATIONS - WINDING UP - LIQUIDATORS
Companies - winding up - liquidators' application for dispensation from compliance with s 475 and s 476 of Corporations Act 2001 (Cth) - whether court has power to dispense - meaning of "steps" required by this Act" - application granted.
Corporations Act 2001 (Cth) s 439A, s 459P, s 461, s 462, s 465A, s 467(3), s 470, s 474, s 475, s 476, s 497(5), s 513A, s 513B, s 513C, referred to.
Carter v Newtel Ltd (in liq) (2003) 44 ACSR; re New Par Consols Ltd [1898] 1 QB 573, applied.

RE: HARRIS SCARFE LTD (IN LIQ) (No 2)
[2007] SASC 211
Civil

DEBELLE J. This is an application by liquidators for dispensation from having to comply with the terms of s 475 and s 476 of the Corporations Act 2001 (Cth) ("the Act").
On 3 April 2001 Michael Joseph Dwyer and Lindsay Philip Maxsted were appointed administrators of Harris Scarfe Holdings Ltd as well as of other companies in the Harris Scarfe group. On 3 January 2002 a resolution for the voluntary winding up of Harris Scarfe Holdings Ltd as well as the other companies in the Harris Scarfe group was carried at a meeting of creditors. The creditors also resolved to appoint Messrs Dwyer and Maxsted joint and several liquidators of Harris Scarfe Holdings Ltd and the other companies in the Harris Scarfe group. As Messrs Dwyer and Maxsted had been appointed administrators of each of the companies on 3 April 2001, the winding up of the company was deemed to commence on 3 April 2001: see ss 513B and 513C of the Act.
Mr Maxsted resigned as liquidator on 11 November 2004. By order of a Master of this court made on 21 January 2005, Mr Dwyer was removed as liquidator and Samuel Charles Davies and Colin MacIntosh Nicol were appointed liquidators in his stead. Messrs Davies and Nicol have continued as liquidators and have proceeded with the administration of the winding up. The liquidators decided that it was prudent to apply for an order of the court to be made winding up the companies.
Notwithstanding that a company is already in the course of a voluntary winding up, a court may make an order that the company be wound up: see s 459P as well as ss 461 and 462 of the Act. However, there must be good reason for the court to make such an order: Carter v Newtel Ltd (in liq) (2003) 44 ACSR 661 at [5]. On 26 March 2007 Gray J made an order winding up Harris Scarfe Holdings Ltd, Harris Scarfe Ltd, Harris Scarfe Wholesale Pty Ltd and D-Store Ltd as well as seven other companies in the Harris Scarfe group. By reason of the fact that the winding up of each of the companies in the Harris Scarfe group was already in progress, the winding up is deemed to have begun on the date when the winding up began: see s 513A of the Act. As already noted, that date was 3 April 2001.
When Messrs Dwyer and Maxsted were liquidators they had obtained from directors of the companies in the Harris Scarfe group signed reports as to the affairs of each company in the group. Presumably those reports were obtained pursuant to s 497(5) of the Act. All reports save two were verified by directors. In addition, while they were administrators of the companies in the Harris Scarfe group, Messrs Dwyer and Maxsted had reported to creditors pursuant to s 439A of the Act. In the course of their duties as liquidators Messrs Dwyer and Maxsted also reported to creditors from time to time.
When the court has made an order to wind up a company, s 475 and s 476 of the Act require reports to be prepared as to the affairs of the company. Section 475(1) requires the director and secretary of the company to report in a prescribed form as to the affairs of the company. Section 475(2) authorises the liquidator by notice to require certain persons to make reports containing such information as is specified in the notice. Section 476 obliges the liquidator within two months after receiving a report pursuant to s 475 to lodge a preliminary report as to the matters prescribed in s 476. The liquidators seek dispensation from having to comply with these requirements.
There is no need for any dispensation from s 475(2) since the liquidators have a complete discretion whether they should seek reports under that provision. Thus, the only question is whether an order should be made relieving the liquidators of the need to comply with s 475(1) and s 476.
Neither s 475 nor s 476 make any allowance for the fact that reports as the affairs of the company will serve little purpose in the case of a company where the winding up has already begun and reports the affairs of the company might have already been provided. It is for that reason the liquidators must seek dispensation.
In the present case, little or no purpose would be served by the liquidators complying with s 475 and s 476. The winding up of these companies began in 2001. It has already been proceeding for more than six years. The reports as to the affairs of each company prepared pursuant to these provisions would not add anything to the knowledge of creditors and contributories who have already received reports of affairs of each company and who have received other reports in the course of the winding up of the companies in the Harris Scarfe group. The intent and purpose of s 475 and s 476 has already been effected by the earlier reports I have mentioned. It is relevant to note also that this application has been served upon the Australian Securities and Investment Commission which consents to the application. In short, there are proper grounds upon which to dispense with compliance with s 475 and s 476.
The real issue on this application is whether the court has power to grant the dispensation which the liquidators seek. For the reasons which follow I believe the court has power to make such an order.
The power to dispense is to be found in s 467(3) of the Act. Section 467 invests powers in the court on the hearing of an application to wind up a company. Section 467(3) is in these terms:
The Court may, on the application coming on for hearing or at any time at the request of the applicant the company or any person who has given notice of intention to appear on the hearing of the application:
(a)     direct that any notices be given or any steps be taken before or after the hearing of the application; and
(b)     dispense with any notice being given or steps being taken that are required by this Act or by the rules, or by any prior order of the Court; and
(c)     direct that oral evidence be taken on the application or any matter relating to the application; and
(d)     direct a speedy hearing or trial of the application or of any issue or matter; and
(e)     allow the application to be amended or withdrawn; and
(f)    give such directions as to the proceedings as the Court thinks fit.
The liquidators have standing to make application under s 467(3) as they are the persons who applied for the orders winding up the companies in the Harris Scarfe group.
The terms of s 467(3) do not limit the exercise of the powers of the court listed therein to the hearing of an application to wind up a company. It will have been noticed that the powers of the court listed in s 467(3) may be exercised either when the application comes on for hearing or at any time at the request of the persons named in s 467(3). Any of those persons may, therefore, make an application under s 467(3) either before or after the application to wind up the company.
Most of the powers listed in s 467(3) relate to the hearing of the application to wind up. However, the fact that paragraph (b) of s 467(3) refers to steps being taken that are required by this Act is, in my view, an expression of an intention to invest the court with power to dispense with steps under the Act which either relate to the application itself or to steps which the Act provides must be taken after a winding up order has been made. That conclusion is reinforced by the fact that s 467(3) may be exercised at the hearing or at any time on the request of the persons named in s 467(3) which plainly includes an application after a winding up order has been made. One purpose for such an application would be to seek dispensation from one or more of the steps required to be taken after the making of the winding up order.
The power to grant dispensation is plainly limited by the terms of s 467(3)(b) to a dispensation from giving notices or taking steps required by the Act, the Corporations Rules, or by any prior order of the court. It is not a power which enables dispensation generally from the provisions of the Act nor from provisions which prescribe rights. The power to dispense is expressly limited to the giving of notices or the steps to be taken. The court will not make an order unless satisfied that the order can be made consistently with the purpose and intent of the Act and that there are good reasons for granting the dispensation. The court has a wide discretion but that discretion must be exercised with due regard to the purpose and intent of the Act.
In Carter v New Tel Ltd (in liq) at [23] Austin J made orders pursuant to s 467(3) dispensing the applicant from complying with, among other things, the obligation to give notice under s 465A and the requirements in s 470(2) to serve a copy of the order on the company and to deliver to the liquidator an office copy of the order and a statement that the order has been served. His Honour did so because he believed that no substantive purpose could be achieved by compliance with those requirements. That was especially so given that the company had already been in liquidation for some six months at the time when the court made the order to wind up the company. However, he did not dispense with the obligation to publish notice of the winding up order and the liquidators appointment because he took the view that the making of those orders should be given appropriate publicity. It is readily apparent that Austin J had regard to the purpose and intent of the Act when deciding the extent to which dispensation should be ordered.
The question whether the court can grant the dispensation sought in this case turns on the question whether the requirements of s 475 and s 476 can properly be regarded as steps required by the Act within the meaning of s 467(3)(b).
I do not think that the steps to which s 467(3) refers are limited to purely procedural steps incidental to the making of the application to wind up a company or incidental to the making of the order or the publishing of the order. If that had been the intention, Parliament could have expressed s 467(3) in terms which so limited its operation. In my view, the expression "steps being taken that are required under this Act" is intended to include those steps which the Act requires to be taken after a winding up order has been made which are taken at the outset of the winding up to enable its proper administration. By way of example, those steps include s 474 which requires a liquidator to take control of all of the property of the company. In the present case, s 474 has no work to do because the liquidators already have control of the property of the companies in the Harris Scarfe group. However, if like s 475, s 474 had required that liquidators take control of the company's property within a specified time after the making of a winding up order by the court, it would be appropriate to dispense with that requirement where the liquidator has already taken control of the company's property.
Section 475 and s 476 are in a same sense steps consequent on the making of the winding up order taken at the outset of the winding up for the purpose of enabling its proper administration. The purpose and intent of s 475 is to equip the liquidator and the creditors with knowledge of the affairs of the company and thereby to assist the orderly and efficient administration of the winding up. Shortly put, its object is to provide information for the purpose of the winding up: re New Par ConsolsLtd [1898] 1 QB 573 at 576. Section 476 provides the means by which the information gained by the liquidator is made available to the public. Section 475 and 476 are not provisions which affect the substantive rights of creditors, contributories or the liquidator but are steps of a procedural nature intended to elicit information as to the affairs of the company and to provide that information to creditors and contributories. They are steps which the Act requires to be taken after the winding up order has been made. The court, therefore, has power to dispense with compliance with each of those provisions. The occasions when it is necessary to dispense with compliance with ss 475 and 476 are likely to be few, for example, when the company is already being wound up and reports as to the affairs of the company have been provided under other provisions of the Act.
For these reasons, there will be an order dispensing the liquidators from having to comply with ss 475 and 476 of the Corporations Act in respect of the companies in the Harris Scarfe group named in the minutes of order.