IGT (Australia) Pty Ltd v Club Blakehurst Ltd

[2010] NSWSC 623

CITATION:	IGT (Australia) Pty Ltd v Club Blakehurst Ltd [2010] NSWSC 623
HEARING DATE(S):	7/6/10
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Lindgren AJ
EX TEMPORE JUDGMENT DATE:	7 June 2010
DECISION:	The Court orders that: (1) The defendant be wound up in insolvency. (2) That Barry Anthony Taylor and Andrew Fletcher Needham of HLB Mann Judd be appointed as liquidators of the defendant. (3) The plaintiff's costs of the proceeding be costs of the winding up. (4) The interlocutory application brought by interlocutory process filed on 6 May 2010 is dismissed. (5) These orders may be taken out forthwith.
LEGISLATION CITED:	Corporations Act 2001 (Cth) ss 436A, 440A(2), 459S
PARTIES:	IGT (Australia) Pty Limited (P) Club Blakehurst Limited (D)
FILE NUMBER(S):	SC 2010/57587
COUNSEL:	J Scarcella (S) (P) J Johnson (D)
SOLICITORS:	Blake Dawson (P) Joseph Grassi & Associates (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

LINDGREN AJ

Monday 7 June 2010

2010/57587 – IGT (AUSTRALIA) PTY LTD v CLUB BLAKEHURST LTD

JUDGMENT

1 HIS HONOUR: Yesterday, the defendant appointed Steven Nicols as administrator of the defendant under s 436A of the Corporations Act 2001 (Cth) (the Act).

2 There was to be heard this morning an application by the defendant for leave under s 459S of the Act to oppose the winding up sought by the plaintiff/creditor on grounds which it was prohibited from relying without that leave.

3 Section 440A(2) of the Act provides that the Court must adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court:

“is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up".

4 Mr Johnson appears this morning for the defendant company and submits that the Court should be so satisfied.

5 Mr Scarcella appears for the plaintiff and submits to the contrary.

6 It is not necessary to delve into the background to any great extent. Apparently, in February 2009 the plaintiff supplied poker machines to the defendant under contracts which contained retention of title clauses. The defendant defaulted; and the plaintiff repossessed the poker machines which it sold.

7 The plaintiff served a statutory demand on the defendant for the balance outstanding, which was $174,135.50. That statutory demand was served in December 2009 and was not satisfied.

8 This proceeding to wind up the defendant was commenced on 5 March 2010.

9 As indicated earlier, the defendant sought leave under s 459S of the Act. It did so by an interlocutory process that was filed on 6 May 2010.

10 The interlocutory application was before the Court last Monday, 31 May, and was stood over by consent to today. The consent arose out of an e-mail dated 28 May 2010 written by Anthea Gilmore for the plaintiff to Tanya Jones for the defendant setting out four conditions of the plaintiff’s agreeing to an adjournment. Ms Jones replied on the morning of Monday 31 May advising that the Board of the defendant accepted the conditions.

11 It seems that things which the conditions or some of them required to happen during the intervening week have not happened. At least if they had I would have been told. For example, there was a condition that the defendant would approach the plaintiff during the week of the adjournment with:

“sensible and realistic options for resolution that will see the debt repaid by no later than September 2010".

12 Another condition was if the plaintiff should not accept any options put forward by the defendant, the defendant’s Board was to provide a consent to be forwarded within the week to the appointment of two named individuals, Barry Taylor and Andrew Needham of HLB Mann Judd Sydney, as administrators. The consents were to be forwarded by 9.00 am this morning but, as noted earlier, the defendant unilaterally yesterday appointed a different individual, Steven Nicols, as administrator.

13 The terms of subsection (2) of s 440A are mandatory. The Court must adjourn the hearing of an application for winding up if the company is under administration and the Court is satisfied that it is in the interests of the creditors for the company to continue in administration rather than be wound up.

14 The question this morning is simply whether the Court is so satisfied.

15 In support of the application for the adjournment, or more accurately in support of his submission that the Court should be satisfied that the interests of creditors favour a continuation of the voluntary administration so that the statutory provision for adjournment should be allowed to operate, Mr Johnson has read an affidavit of Mr Nicols.

16 Mr Nicols states that prior to his appointment yesterday he had, through his employee, Richard Brien, conducted a preliminary investigation into the affairs of the defendant and that the views expressed by him in his affidavit are made having regard to that review by Mr Brien. The affidavit does not indicate over what period and at what depth the review took place. The affidavit contains some general assertions by Mr Nicols including the assertion that as a result of his preliminary enquiries he has formed the opinion that it is in the interests of all of the ordinary unsecured creditors of the defendant that the administration proceed. The affidavit gives no information as to the identity, nature or extent of the general body of the defendant’s creditors.

17 One particular matter that Mr Nicols mentions is that the premises occupied by the defendant are in the nature of a bowling club which the defendant has under two leases: one from Kogarah Council as to part and the other from Kyle Bay (R 100242) Reserve Trust as to the other part. He points out that if a winding up order is made that will be an event of default under the leases. This is true but the two leases also provide that if an administrator of any of the assets of the lessee is appointed that is also an event of default. In other words, under both leases an event of default occurred yesterday.

18 Mr Nicols concludes in his affidavit that on the present information available to him:

“It is possible that ordinary unsecured creditors in the event of a winding up will receive substantially less than they may be able to receive if the defendant is able to trade, maintain control of the premises from which it operates and enter into a Deed of Company Arrangement."

19 Again, this very general statement is unsupported by detailed evidence. In particular, the expressions “possible” and “may be able to receive” are to be noted. No terms of any proposed Deed of Company Arrangement are put forward.

20 It is true, as Mr Nicols says, that the administrator has been in office only since yesterday but some review of the defendant's affairs has been conducted by his employee prior to his appointment.

21 In the result, I am not satisfied that it is in the interests of the defendant’s creditors for the defendant to continue under administration rather than be wound up.

22 Mr Johnson fairly informed the Court that it is not disputed that if the adjournment is not granted a winding up order should be made. I will proceed to make such an order.

23 The Court orders that:

(1) The defendant be wound up in insolvency.

(2) That Barry Anthony Taylor and Andrew Fletcher Needham of HLB Mann Judd be appointed as liquidators of the defendant.

(3) The plaintiff’s costs of the proceeding be costs of the winding up.

(4) The interlocutory application brought by interlocutory process filed on 6 May 2010 is dismissed.

(5) These orders may be taken out forthwith.

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