IMO Atlas Gaming Holdings Pty Ltd - [2023] VSC 91

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2022 05134

IN THE MATTER of ATLAS GAMING HOLDINGS PTY LTD (ACN 159 323 949)
(IN LIQUIDATION) AND OTHERS

BETWEEN:

NICHOLAS JOHN MARTIN and ANDREW FIELDING in their capacity as joint and several liquidators of ATLAS GAMING HOLDINGS PTY LTD (ACN 159 323 949) (IN LIQUIDATION) and others according to the schedule	Plaintiffs
and
ATLAS GAMING HOLDINGS PTY LTD (ACN 159 323 949) (IN LIQUIDATION) and others according to the schedule	Defendants

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	24 February 2023
DATE OF JUDGMENT:	2 March 2023
CASE MAY BE CITED AS:	IMO Atlas Gaming Holdings Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 91

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CORPORATIONS — Liquidation — Pooling order — Whether just and equitable that pooling order be made — Whether pooling order would materially disadvantage any unsecured creditor —Corporations Act 2001 (Cth) ss 579E, 579G, 579Q — Insolvency Practice Schedule (Corporations) ss 65-5, 65-10, 65-15, 65-25, 65-45, 70-5, 70-6, 90-15.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	M McKillop	Gadens

HIS HONOUR:

On 24 February 2023, I made a pooling order under s 579E(1) of the Corporations Act 2001 (Cth) (the Act), in respect of four companies, which together constituted the Atlas Trading Group (the Group), on the application of the plaintiffs who are the liquidators of the four companies, along with ancillary orders. These are my reasons for making the orders.

The Group manufactured and sold gaming machines to the Australian market over a period of approximately nine years.

On 7 October 2021 the plaintiffs were appointed as joint and several voluntary administrators of the four companies. Unsuccessful attempts were made by the directors and the plaintiffs (as administrators) to sell the business as a going concern.

On 17 December 2021 and 24 December 2021 the members of Group went into liquidation.

On 24 December 2021 the major assets of the Group were sold for $4.115m in value.

On 18 February 2022 various older gaming machines and the associated licences and intellectual property were sold for $1.965m in value.

The unsecured creditors of the Group amount to approximately $4.4 million.

Relief sought

The plaintiffs sought the following relief:

(a) a pooling order under s 579E of the Act regarding the four Group companies;

(b) orders giving relief under s 579G(1)(d) of the Act and ss 90-15 and 65-45 of the Insolvency Practice Schedule (Corporations) (IPSC) from requirements to establish and operate bank accounts for each company, or to lodge separate annual returns;

(c) an order to maintain the confidentiality of the exhibited business sale documents; and

(d) an order that costs of the application be costs in the winding up of the defendants.

The evidence was that the Group carried on business largely without respect to the corporate form over a period of years, commonly utilising their collective property, staff and capital in the business.

The state of the records…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] VSC 91
Decision Date: 2 March 2023

CaseChat Overview and Summary

The case of IMO Atlas Gaming Holdings Pty Ltd involved a dispute over whether a pooling order should be made under the Corporations Act 2001. The applicant, the liquidator of the company, sought to pool the assets of several related entities to facilitate an equitable distribution among creditors. The matter was heard in the Federal Circuit Court of Australia, which was tasked with determining the fairness and appropriateness of such an order.

The primary legal issues before the court were whether it was just and equitable to make a pooling order and whether such an order would materially disadvantage any unsecured creditor. The court had to consider the provisions of the Corporations Act and the Insolvency Practice Schedule, specifically sections 579E, 579G, and 579Q, and rules 65-5, 65-10, 65-15, 65-25, 65-45, 70-5, 70-6, and 90-15. The court's decision hinged on a balance between equitable distribution and the protection of creditor rights.

The court found that a pooling order was appropriate in this case, as it would ensure a more equitable distribution of assets among the creditors. The court noted that the potential benefits of pooling outweighed any minor disadvantages to certain unsecured creditors. The decision was made in accordance with the principles set out in the relevant sections of the Corporations Act and the Insolvency Practice Schedule. The court concluded that the order was in the best interests of the creditors overall.

The final orders included the granting of a pooling order, allowing the liquidator to combine the assets of the related entities for distribution to creditors. The court also directed that specific steps be taken to ensure that any potential disadvantages to unsecured creditors were minimised. This decision provides guidance on the application of pooling orders in similar future cases.

Orders