In the matter of ACN 000 237 678 Pty Ltd (formerly Custom Coaches (Sales) Pty Ltd) (in liquidation)

[2017] NSWSC 842

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of ACN 000 237 678 Pty Ltd (formerly Custom Coaches (Sales) Pty Ltd) (in liquidation) [2017] NSWSC 842
Hearing dates:	22 June 2017
Date of orders:	22 June 2017
Decision date:	22 June 2017
Jurisdiction:	Equity - Corporations List
Before:	Robb J
Decision:	See paragraph 27.
Catchwords:	CORPORATIONS – Winding up – Conduct of liquidation – Application for directions – Where remaining asset of Company is a term deposit held by the National Australia Bank – Where term deposit is security for performance bonds issued by the Company – Where only priority creditor is the Department of Employment – Whether Court should approve assignment of the term deposit to the Department.
Legislation Cited:	Corporations Act 2001 (Cth) ss 511, 601AG Corporations Regulations 2001 (Cth) reg 10.25.02 Insolvency Law Reform Act 2016 (Cth) sch 2 Corporations and Other Legislation Amendment Act (Insolvency Law Reform) Regulation 2016 (Cth)
Category:	Principal judgment
Parties:	ACN 000 237 678 Pty Ltd (formerly Custom Coaches (Sales) Pty Ltd) (in liquidation) (first plaintiff) Vaughan Neil Strawbridge in his capacity as joint and several liquidator of the first plaintiff (second plaintiff) Timothy Bryce Norman in his capacity as joint and several liquidator of the first plaintiff (third plaintiff)
Representation:	Counsel: D Sulan and L Rich (plaintiffs)   Solicitors: Clayton Utz (plaintiffs)
File Number(s):	2017/112912
Publication restriction:	None

Judgment

1. ACN 000 237 678 Pty Ltd (formerly Custom Coaches (Sales) Pty Ltd) (in liquidation) is the first plaintiff (the Company). Mr Vaughan Neil Strawbridge in his capacity as joint and several liquidator of the Company is the second plaintiff, and Mr Timothy Bryce Norman, in the same capacity, is the third plaintiff (the Liquidators).

2. By originating process filed on 13 April 2017, the plaintiffs make the following application, and seek the relief included in that application:

This application is made under sections 479(3), 506(1)(b), 509 and 511 of the Corporations Act 2001 (Cth).

The Plaintiffs seek directions and orders that they are justified in entering into a Deed of Assignment and Payment Direction in the form annexed to this process and in proceeding to deregister ACN 000 237 678 Pty Ltd (formerly Custom Coaches (Sales) Pty Ltd) (In Liquidation) (the Company).

On the facts stated in the supporting affidavit of Vaughan Neil Strawbridge sworn on 13 April 2017, the Plaintiffs apply for the following relief:

1. A direction pursuant to section 479(3), alternatively, section 511 of the Corporations Act 2001 (Cth), that the Plaintiffs are justified in entering into a deed of assignment and payment direction with the National Australia Bank Limited and the Commonwealth Department of Employment in the form annexed to this Originating Process and marked "A".

2. A direction that pursuant to section 479(3), alternatively, section 511 of the Corporations Act 2001 (Cth), that upon entering into the Deed of Assignment and Payment Direction referred to in paragraph 1, the Plaintiffs are justified in convening the meetings provided for in section 509(1) - (4) of the Corporations Act 2001 (Cth) in order to effect the deregistration of the Company.

3. The Plaintiffs' costs of this application be paid out of the assets of the Company.

4. Such further or other orders as the Court sees fit.

3. On 30 May 2014, the Liquidators were appointed joint and several administrators of the Company by the directors pursuant to s 436A of the Corporations Act 2001 (Cth) (the Act). By reason of a resolution of the creditors of the Company, it was placed into liquidation on 16 September 2014. The winding up is therefore a voluntary winding up.

4. The liquidators have substantially completed the winding up of the Company’s affairs.

5. The only remaining assets of the company are an amount of approximately $311,470 in the Company’s bank account, and an amount of $519,204.75 in a term deposit held by the NAB (the Term Deposit).

6. The NAB is entitled to continue to hold the Term Deposit by way of security until such time as a number of OEM performance bonds expire. If any of the performance bonds are called upon, then the amount held by the NAB will be reduced depending upon the amount of the payment under the relevant performance bond.

7. The last of the performance bonds is due to expire in July 2021.

8. The Liquidators do not wish to incur the costs and expenses of the Company remaining in existence and on the ASIC register in circumstances where there is nothing more for them to do other than collect the remaining monies held by the NAB upon expiry of the last performance bond, which will not be possible until 2021.

9. The main priority creditor of the Company is the Commonwealth Department of Employment (the Department) through its Fair Entitlement Guarantee Scheme, which is currently owed the sum of $656,357 by the Company.

10. The evidence establishes that, after the payment of the costs and expenses of the winding up, the two remaining assets of the Company will not be sufficient to pay out all of the Company’s priority creditors.

11. The cash in the Company’s bank account is sufficient to pay the costs and expenses of the winding up, and also the whole of the debts owed to the priority creditors of the Company other than the Department. The remaining assets of the Company will be insufficient to repay the whole of the debt owed by the Company to the Department, even if no calls are made upon the performance bonds in respect of which the NAB holds security over the Term Deposit.

12. In no event will the assets of the Company permit any payment at all to the general unsecured creditors of the Company.

13. The Department has agreed with the Liquidators to the terms of the deed referred to in order 1 in the originating process, as has the NAB. The practical effect of the deed, which has already been executed by the Department and the NAB, is that the Liquidators will cause the Company to assign all of the Company’s right, title and interest in the Term Deposit to the Department: cl 3(a). By cl 3(b) the NAB agrees to the assignment.

14. Clause 2 has the effect that the deed will not be binding on the parties or have any force or effect until the Liquidators have received directions from the Supreme Court either approving the deed or providing that the Liquidators are justified in entering into the deed.

15. There are other terms of the deed that need not be set out.

16. If it becomes binding, the effect of the deed will be to assign to the Department whatever part of the Term Deposit remains after all of the performance bonds have expired, and after any claims have been paid in respect of those bonds. As I have said, the amount of the Term Deposit is not sufficient to pay the whole of the debt owed by the Company to the Department, even if no calls are made on the performance bonds.

17. The Department has agreed with the Liquidators that they may cause the Company to pay 100 cents in the dollar to all of the priority creditors of the Company other than the Department. That would have the effect that the priority creditors would not receive pari passu treatment. The entitlement of the priority creditors to pari passu treatment will not, however, be disturbed in any formal manner. The Department has taken the practical course of agreeing to a commercially simplified proposal which will have the result that an amount of about $38,774 will be paid to the other priority creditors out of the cash available to the Company, and as the debts owed to those other priority creditors will be paid in full, it will no longer be necessary for any provision to be made in respect of the obligations of the Company to those other creditors. That will reduce the administration costs of the winding up, and will, subject to the approval or direction of the Court being given, enable the deregistration of the company to happen long before 2021. That will have the effect that continuing administration costs up to 2021 will not need to be incurred, so that the amount of the Term Deposit will not be reduced by the need to meet such costs. The amount of the Term Deposit to which the Company would otherwise have been entitled on the expiration of the last of the performance bonds will simply be assigned to the Department. That is a result that the Department deems to be commercially satisfactory.

18. The evidence satisfies me that the course that the plaintiffs wish to take is a sensible and appropriate one and that in principle the Court should make the orders sought by the plaintiffs.

19. As the winding up of the Company is a voluntary one, s 511 of the Act is the relevant source of the Court’s power to make the orders that have been sought. That section will continue to have effect until 1 September 2017 by reason of the Corporations and Other Legislation Amendment Act (Insolvency Law Reform) Regulation 2016 (Cth), which introduced Part 10.25 into the Corporations Regulations 2001 (Cth). Corporations Regulations, reg 10.25.02(3)(h) provides that the amendments made by certain items of Part 2 of Schedule 2 to the Insolvency Law Reform Act 2016 (Cth), including relevantly item 170 (which repealed s 511), apply in relation to external administrations on and after 1 September 2017. Thus s 511 of the Act will continue to apply until 1 September 2017.

20. There were only two matters of concern that I had as to whether it was appropriate for the Court to make the orders sought by the plaintiffs with immediate effect. Both related to the possibility that the deregistration of the Company could have the unintended effect that the rights of third parties might be extinguished, without the third parties having the opportunity to contest the making of the orders.

21. The evidence given by the Liquidators showed that a company called Pagge Pty Ltd, trading as QTK Group, had made a claim for $168,482 against the Company. The evidence did not establish in any detail what the basis of that claim was. There was evidence of negotiations between the solicitors for the parties to settle the claim, and on 22 July 2016 the Liquidators’ solicitors finally rejected an offer made on behalf of the claimant. Nothing further has happened in relation to that claim since 27 September 2016.

22. It is possible that the claimant was given notice of the present application by the plaintiffs, and has not appeared to contest the application, although there is some uncertainty as to whether the notice to the claimant was sent to the correct address.

23. A second claim was received by the Company from Mr Josef Kansky in relation to worker’s compensation. It seems likely that the workers compensation claim will be covered by s 601AG of the Act, so that the claimant will not be affected by the deregistration of the Company. However, on the hearing of the application the position was not certain.

24. The evidence disclosed a second worker’s compensation claim, by Mr George Glyntzos, but the evidence also included a letter dated 28 November 2016 from the claimant’s solicitor to the solicitors for the Liquidators that clearly stated that the claimant would make no claim against the Company, as the claimant would have recourse against the relevant worker’s compensation insurer.

25. It is sufficient to record that counsel for the plaintiffs offered to resolve the doubt by an arrangement whereby the Court would make the orders sought by the plaintiffs immediately, but stay the operation of the orders for a short period in order to enable the Liquidators to give appropriate notice of the application to the claimants. If within the period the claimants do not take steps to cause the Court to vary the orders, then they will automatically become effective.

26. In my view that is a sensible way to deal with a relatively minor problem that most likely would not have involved any loss being suffered by any third parties as a result of the deregistration of the Company in any event.

27. Accordingly, at the end of the hearing I made the following orders:

1. Orders that the plaintiffs are justified in entering into the Deed of Assignment and Payment Direction dated 24 March 2017 with the National Australia Bank Limited and the Commonwealth Department of Employment (Deed) in the form annexed to these Orders and marked "A".

2. Orders that upon entering into the Deed, the plaintiffs are justified in convening the meetings provided for in s 509(1)-(4) of the Corporations Act 2001 (Cth) in order to effect the deregistration of the first plaintiff.

3. Orders that the plaintiffs' costs of this application be paid out of the assets of the first plaintiff.

4. Orders 1-3 be stayed for a period of 14 days at which time, in the absence of any further order, such orders will take effect.

5. Directs that by no later than 5 pm 26 June 2017, the plaintiffs are to serve a copy of these orders (other than Annexure A) and a copy of the Update to Creditors dated 6 June 2017 which appears at Annexure A to the affidavit of Vaughan Neil Strawbridge sworn 20 June 2017 upon:

(a) Pagge Pty Ltd at its registered office addressed and Pagge Pty Ltd c/o the offices of Hall & Willcox, Lv 11 Rialto South Tower 525 Collins Street Melbourne Vic 3000;

(b) Mr Josef Kansy c/o Villari Lawyers PO Box 6123 Halifax Street SA 5000.

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Decision last updated: 26 June 2017