In the matter of Australian Mobile Mining Equipment Systems and Accessories Pty Limited In the matter of Chirachi Investments Pty Ltd
[2013] NSWSC 1790
•25 November 2013
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Australian Mobile Mining Equipment Systems and Accessories Pty Limited In the matter of Chirachi Investments Pty Ltd [2013] NSWSC 1790 Hearing dates: 25 November 2013 Decision date: 25 November 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Directions made for parties to approach the Corporation's Registrar for nomination of a liquidator and for parties to provide short minutes of order to give effect to the judgment. Orders made for costs of the applications to be costs in the respective windings up.
Catchwords: CORPORATIONS - winding up - winding up voluntarily - where parties consent to appointment of a liquidator - whether just and equitable that winding up order be made. Legislation Cited: Corporations Act 2001 (Cth) ss 461(1)(e), 461(1)(f), 461(1)(g), 461(1)(k), 472(2) Category: Principal judgment Parties: 2013/355056
Noel Brown (Applicant)
Australian Mobile Mining Equipment Systems and Accessories Pty Limited (First Defendant)
Murray Bridle (Second Defendant)
2013/355100
Noel Brown (Applicant)
Chirachi Investments Pty Limited (First Defendant)
Murray Bridle (Second Defendant)Representation: Counsel:
J.T. Johnson (morning), A. Williams (Solicitor - afternoon) (Applicant)
R.D. Marshall (Second Defendant)
Solicitors:
Megan McCormick & Andrew Williams (Applicant)
Kardos Scanlan (Second Defendant)
File Number(s): 2013/355056 2013/355100
Judgment - EX TEMPORE
By originating process filed by leave, Mr Noel Brown applies under s 461(1)(e) to (g) and (k) and s 472(2) of the Corporations Act 2001 (Cth) for the winding up of two entities, Chirachi Investments Pty Limited ("CIPL") and Australian Mobile Mining Equipment Systems and Accessories Pty Limited ("AMM"). Initially, Mr Brown also sought orders for the appointment of Messrs Purchas and Vardy as provisional liquidators of the two entities under s 472(2) of the Corporations Act. However, the parties had reached agreement when the hearing before me commenced that there was little utility in the appointment of a provisional liquidator and that the preferable course in the relevant circumstances was for the appointment of an official liquidator to each company, who could attend to an orderly winding up of the company with a view to distributing a potential surplus to shareholders.
In these circumstances, where the parties consent to the appointment of a liquidator, it is only necessary for the Court to be satisfied that it would have jurisdiction to make the relevant appointment and that such an order is a proper order to be made, albeit the propriety of the order may more readily be inferred where each of the parties consents to it. Relevantly, s 461(1)(k) of the Corporations Act allows the Court to make such an order where it is of the opinion that it is just and equitable that a company be wound up. Such an order may be made on application by a contributory to the company. It is plain that Mr Brown is a contributory in respect of AMM, since he holds shares in that entity. On balance, I am satisfied that he is also a contributory in respect of CIPL, because a company search which is in evidence records him and his wife as holding shares in that entity as trustee for a family trust, notwithstanding that his affidavit referred only to his wife's ownership of those shares.
In the present case, it does seem to me that it is necessary or appropriate to deal with those grounds for the relief sought which turn on oppression; the parties have reached agreement that it is appropriate that a liquidator be appointed; while certain allegations of oppression are made, I understand that agreement to have been reached without admission of those allegations, and the defendant has tendered earlier correspondence as to a potential buyout of the shares which might also be relevant to the relevant matters. It is instead, in my view, open to the Court to conclude that it is just and equitable that the companies be wound up, given that it is plain that the shareholders and directors are in deadlock, and that the companies' financial circumstances are such as to warrant a winding up.
So far as CIPL is concerned, it appears that it owns a factory property at Wetherill Park, NSW, which had been acquired to be occupied as factory premises by AMM, and has a secured borrowing from National Australia Bank in respect of a loan to purchase that property. AMM has since closed its business, and in those circumstances is unable to pay rent on the premises, and CIPL's repayment due to the National Australia Bank fell into arrears on 20 November 2013, with a further payment falling due on 20 December 2013.
So far as AMM is concerned, it may have a substantial excess of assets over liabilities, depending on a question which may be disputed as to a loan recorded in its balance sheet, and depending upon the price for which the property owned by CIPL is realised and any liability which it may have to National Australia Bank in respect of a guarantee over the borrowing in respect of that property. However, it appears that AMM presently has little or no cash, and I am satisfied that it is insolvent on a cashflow basis, notwithstanding its potentially significant excess of assets over liabilities. CIPL in turn cannot meet its obligations to National Australia Bank without payment of rent by AMM and, as Mr Brown points out in his evidence, there is a significant risk that a continuing failure to make payments due to NAB would lead to the appointment of a receiver and a sale of the relevant property without the companies having any input into that process.
For these reasons, it seems to me that the Court has jurisdiction to make a winding up order, on the just and equitable ground, and that it can make such an order with the parties' consent, so that a liquidator may exercise independent control over the realisation of the companies' assets in circumstances that shareholders are in deadlock and the companies have difficulties to which I referred above in meeting their obligations.
A dispute arose between the parties as to the identity of a liquidator to be appointed. On the one hand, the plaintiffs, as I noted above, had proposed the appointment of Mr Purchas and Mr Vardy as liquidators of the two companies. On the other, the defendants proposed the appointment of Mr David Young or Mr Graham Hill as liquidators of the respective companies. In a winding up in insolvency, initiated on an application by a creditor, the Court's practice is typically to appoint the applicant's nominated liquidator, unless some reason arises why such an appointment should not be made. It does not seem to me that that practice is applicable here, where the appointment is one which will be made following a winding up order made by consent, and in circumstances that neither shareholder has any greater claim to be entitled to appoint a liquidator of his choice than the other. No reason has been shown before me why any of the suggested liquidators would not be an appropriate appointment, and each of them has given a consent indicating that they have no conflict of interest or duty which would make it improper for them to be appointed as liquidator. On one view, the Court could therefore appoint any of the three nominated liquidators to the relevant companies. However, I raised with the parties in the course of submissions that it seemed undesirable to commence a liquidation with a dispute between the parties as to the identity of the liquidator, which was only likely to generate further disputes or exacerbate existing disputes as the liquidation proceeded. I invited the parties to seek to reach a consensus as to a liquidator who was acceptable to both of them, but no such consensus was reached.
In these circumstances, it seems to me that the preferable course is for the Court to depart from the practice which would be adopted in a liquidation brought about by a creditor's application, and instead appoint the next liquidator from the Court's list of liquidators available for appointment that is maintained by the Corporations Registrar. Neither party ultimately opposed that course, which has the advantage that there will be no question that the person appointed from that list is not a person who is independent or has any previous relationship with the parties which might impact on the performance of his or her duties.
I therefore direct the parties to approach the Corporations Registrar for nomination of the next liquidator on the list maintained by the Registrar, to be appointed as official liquidator of each of Australian Mobile Mining Equipment Systems and Accessories Pty Limited and Chirachi Investments Pty Limited. I will also make, in conjunction with the appointment of a liquidator, an order that each of those companies be wound up under s 461(1)(k) of the Corporations Act 2001. I direct the parties to bring in short minutes of order to give effect to my judgment, by 4 pm on 28 November 2013, or such other time as may be agreed between them and notified to my Associate.
I have also heard the parties as to costs. Each of the legal representatives of the parties has properly recognised that this application has been made in good faith, and approached in good faith by both parties, as the agreement which was reached between them to proceed to the appointment of an official liquidator and the reasons which I have set out above illustrate. In these circumstances, each of the legal representatives recognise the logic of an order that the costs of both parties be costs of the winding up. It seems to me that the logic in such an order is compelling, in the relevant circumstances, particularly where it appears likely that there should be a surplus at least in the case of the winding up of AMM.
For these reasons I add a further order to the orders which I have made, namely, that each party's costs of the application be costs of the winding up.
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Decision last updated: 13 December 2013
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