In the matter of Ballistic Australia Pty Limited (ACN 112 963 238)

[2014] NSWSC 1495

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Ballistic Australia Pty Limited (ACN 112 963 238) [2014] NSWSC 1495
Hearing dates:	14 July 2014
Date of orders:	14 July 2014
Decision date:	14 July 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Proceedings adjourned to 28 July 2014
Catchwords:	CORPORATIONS – winding up – application by shareholder for winding up on just and equitable ground – deadlock – whether other shareholder should be joined as defendant
Legislation Cited:	(Cth) Corporations Act 2001, s 459A, s 459P, s 461 (NSW) Supreme Court (Corporations) Rules 1999, r 2.13(1), r 2.13(3) (NSW) Uniform Civil Procedure Rules 2005, r 6.24
Cases Cited:	Dolvelle Pty Limited v Australian MacFarms Pty Limited (1998) 28 ACSR 175 In Re Bradford Navigation Company (1870) LR 5 Ch 600 Re British Nation Life Assurance Association (1872) 14 LR Eq 492 Re Gasbourne Pty Limited (1984) 8 ACLR 618 Re Third Lojebo Pty Limited (1981) 6 ACLR 409 Shakespeares Pie Co Australia Pty Limited v Multipye Pty Limited [2005] NSWSC 1338
Category:	Procedural and other rulings
Parties:	Allan Raynor Arthur (first plaintiff) Arthur Pipe and Steel Australia Pty Ltd ACN 067 516 769 (second plaintiff) Ballistic Australia Pty Ltd ACN 112 963 238 (Defendant)
Representation:	Counsel: D Gasic (solicitor) (plaintiffs) R McGuiness (solicitor) (defendant) Solicitors: Australian Business Lawyers and Advisors (plaintiffs) Watson Mangioni (defendant)
File Number(s):	2014/166187

Judgment (ex tempore)

1. HIS HONOUR: Before the Court is an originating process filed on 3 June 2014 whereby the first plaintiff Alan Raymond Arthur and the second plaintiff Arthur Pipe & Steel Australia Pty Limited claim orders for the winding up of the defendant Ballistic Australia Pty Limited pursuant to s 459A and alternatively s 461 of the (Cth) Corporations Act 2001, together with an interlocutory process also filed on 3 June 2014 in which the plaintiffs claim leave to bring the winding up proceedings in their capacity as a director and shareholder respectively pursuant to s 459A and s 459P.

2. The interlocutory process was first returnable on 10 June 2014, and the originating process was allocated a return date of 16 July 2014. On 10 June, on the application of the plaintiff, the appointment of 16 July for the hearing of the originating process was vacated and both the originating process and the interlocutory process were adjourned to today 14 July.

3. Although it is sought also to rely on insolvency, it appears that the principal basis of the application is the just and equitable ground, which is said to be established in particular by deadlock between the shareholders, who are equally the second plaintiff and one Mr Dodson, and the directors, who are the first plaintiff and the said Mr Dodson. Although there has been prior correspondence between the plaintiffs' solicitors and the solicitors said to act for Mr Dodson, there is no appearance on his behalf today. However, Mr McGuinness, solicitor, purports to appear on behalf of the defendant company. Mr McGuinness informs the Court, and I do not doubt, that he holds a written retainer executed by Mr Dodson as a director of the company. However, in circumstances where, on the affidavit and documentary evidence, it is manifest that Mr Dodson is but one of two directors and one of two equal shareholders and the other shareholders and director are the plaintiffs in the proceedings, it is impossible to see how Mr Dodson could, on behalf of the company, have authorised the retainer of a solicitor to oppose the winding up proceedings. In those circumstances, it seems to me that Mr McGuinness cannot have been retained by and on behalf of the defendant company. No notice of appearance has been filed, and while ordinarily I would hear Mr McGuinness upon an undertaking to file a notice of appearance, it seems to me that inviting him to give such an undertaking in circumstances where there could not be a valid retainer would not be appropriate. Accordingly, as things stand, there is no appearance on behalf of the company, and no notice of intention to appear on behalf of any creditor or contributory.

4. A question has arisen as to whether Mr Dodson should be joined as a defendant. It is well-established that in winding up proceedings creditors and contributories may be heard on the hearing of the winding up application. This rule, earlier recognition of which is to be found in In Re Bradford Navigation Company (1870) LR 5 Ch 600 and Re British Nation Life Assurance Association (1872) 14 LR Eq 492, finds more recent expression in this country in Re Third Lojebo Pty Limited (1981) 6 ACLR 409, 416; Re Gasbourne Pty Limited (1984) 8 ACLR 618, 643-645; and Dolvelle Pty Limited v Australian MacFarms Pty Limited (1998) 28 ACSR 175, 181.

5. However, that creditors and contributories other than the plaintiff may be heard on a winding up application does not mean that they are necessary parties in the sense of having to be joined as defendants to the proceedings in order that they be properly constituted. In Shakespeares Pie Co Australia Pty Limited v Multipye Pty Limited [2005] NSWSC 1338, Barrett J, as his Honour then was, explained (at [22]-[23]) that provision for the joinder of defendants in a winding up application is made by (NSW) Supreme Court (Corporations) Rules 1999, r 2.13(3), which does not prescribe criteria against which any joinder application is to be judged, so that the generally applicable criteria referred to in (NSW) Uniform Civil Procedure Rules 2005, r 6.24, which provides that defendants must be joined if "necessary to the determination of all matters in dispute" in the proceedings, is applicable. As his Honour went on to explain, in winding up proceedings it is in no way essential to the complete and proper constitution of proceedings that any creditor or shareholder or beneficial owner of shares become a party, where no relief is or needs to be sought against them. Provision for the long-established entitlement of creditors and contributories to be heard is to be found in rr 2.13(1) and (3), which permit the Court, on application or of its own motion, to hear creditors and contributories without their being joined as a party, or to join them as defendants; but that such a course is permissible does not mean that they must be joined as defendants in the absence of some application on their part to be heard.

6. In reality, proceedings for winding up are not proceedings against the shareholders, even against a fifty percent shareholder, nor do they, at least in a legal sense, affect the interests of the shareholder. The shareholder continues to hold shares, although the status of the company may be changed by the process of liquidation. It is a necessary incident of holding a share in the company in the first place, that ultimately the shareholder’s right is to receive a return of capital and such dividend as there may be upon liquidation.

7. Accordingly, it seems to me that the proceedings are not inadequately constituted by reason of the absence of Mr Dodson as a party. In the absence of any appearance on his behalf, and I observe that Mr McGuinness eschewed any suggestion that he appeared on behalf of Mr Dodson, there is no reason to make an order, at least at this stage, joining him as a defendant. Were a valid application to be made on his behalf for joinder, that can be addressed when it is made. However, if it is to be made, it would need to be made very promptly, since the evidence suggests that Mr Dodson has had ample notice of the proceedings already and, indeed, it is he who causes Mr McGuinness to purport to appear on behalf of the company today.

8. That said, the matter cannot proceed today, as not all necessary formal steps have been taken. Accordingly, they will in any event have to be adjourned. I see no utility in making any directions about Mr Dodson's position, since he is not a party and is not represented. I will therefore simply adjourn the proceedings to a date at which they can be heard and it will then be a matter for Mr Dodson, if he is minded to do so, to make some application in the meantime.

9. The Court orders that the proceedings be adjourned to 28 July 2014 at 9.45 in the corporations judge's motions list.

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Decision last updated: 03 February 2015