In the matter of Lawrenson Light Metal Diecasting Pty Limited (in liq)

[2020] NSWSC 1819

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Lawrenson Light Metal Diecasting Pty Limited (in liq) [2020] NSWSC 1819

Hearing dates:

9 and 30 November 2020

Date of orders:

16 December 2020

Decision date:

16 December 2020

Jurisdiction:

Equity - Corporations List

Before:

Gleeson J

Decision:

(1)   The amended originating process is dismissed.

(2)   Direct that a copy of these reasons be provided to the Australian Securities and Investments Commission (ASIC) for its consideration.

(3) Reserve for further consideration any application by the liquidator of Lawrenson Light Metal Diecasting Pty Limited (in liq), or ASIC, for relief under s 447A of the Corporations Act 2001 (Cth), provided that any such application is made by filing an interlocutory process no later than 30 January 2021, with notice to Mr Jorgensen and Mijac Investments Pty Ltd.

Catchwords:

CORPORATIONS – winding up – standing – where creditors’ voluntary liquidation commenced in 1999 – administrator appointed by liquidator in 2010 – where creditors approved deed of company arrangement – where deed never signed by proposed deed administrator – application by persons claiming to be creditors or shareholders for authority to effectuate terms of deed of company arrangement by lodging notice with ASIC to bring deed to end – Corporations Act 2001 (Cth) s 445G(3) – application to terminate winding up – Corporations Act s 446A and s 482 – whether applicants have standing as creditor or shareholder/contributory of company

CORPORATIONS – winding up – where purported deed of company arrangement never signed by proposed deed administrator – where another person signed the deed of company arrangement as purported deed administrator – whether deed of company arrangement brought into existence – Corporations Act ss 435C, 436B, 436E, 439A, 444A, 444B, 445G, 449C

CORPORATIONS – winding up – court’s powers – where company in voluntary administration – where administrator resigned in June 2010 – where vacancy in office of administrator not filled – whether appropriate for Court to declare administration came to an end when administrator resigned – Corporations Act s 447A – where no application by ASIC or liquidator for relief under s 447A

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56

Corporations Act 2001 (Cth), ss 198G, 435C, 436B, 436F, 436E, 439A, 444A, 444B, 445G, 446A, 447A, 449C, 481, 482, 513B, 513C, 601, Pt 5.3A, Sch 2

Insolvency Practice Schedule, Dvn 80, s 90-35

Cases Cited:

Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30

Australian Guarantee Corporation v Lawrence (1999) 17 ACLC 1,226

Chief Commissioner of State Revenue v Rafferty’s Resort Management Pty Ltd (in liq) [2008] NSWSC 452; (2008) 66 ACSR 199

Deputy Federal Commissioner of Taxation v Comcorp Australia (1996) 21 ACSR 590

Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd [2020] FCA 1395

MYT Engineering v Mulcon (1997) 140 FLR 247; 25 ACSR 78

Petrochemical Industries Ltd v Dempster Nominees Pty Ltd (1994) 15 ACSR 468

Re Connections Total Fitness for the Family Pty Ltd (administrator appointed) [2014] NSWSC 75

Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (admins apptd)(No 2) [2020] FCA 472

Category:

Principal judgment

Parties:

Alan Jorgensen (First plaintiff)
Mijac Investments Pty Ltd (Second plaintiff)
Lawrenson Light Metal Diecasting Pty Ltd (in liq) (Defendant)

Representation:

Counsel:
A Jorgensen (Self-represented) (Plaintiffs)
C Pulverman (Liquidator) (Defendant)
R Scheelings (ASIC) (Amicus curiae – 9 November 2020)

Solicitors:
Wisewould Mahony Lawyers (Liquidator) (Defendant)
Australian Securities and Investments Commission (Amicus curiae)

File Number(s):

2020/256598

Judgment

1. GLEESON J: Application is made by Alan Jorgensen and Mijac Investments Pty Ltd (Mijac) for orders in relation to the external administration of Lawrenson Light Metal Diecasting Pty Limited (in liq) (LLMDC), seeking to bring a purported deed of company arrangement to an end and to terminate the winding up of LLMDC.

Outline of the external administration of LLMDC

2. In broad outline, the application arises in the following circumstances. LLMDC is subject to a deemed creditors voluntary winding up which commenced more than 20 years ago. On 10 September 1999, Anthony Robert Cant was appointed voluntary administrator of LLMDC. On 5 October 1999, the creditors resolved that LLMDC enter into a deed of company arrangement. Mr Cant became the deed administrator after LLMDC and Mr Cant executed a deed of company arrangement. On 7 December 1999, Mr Cant ceased to be deed administrator and became liquidator when the creditors resolved to wind up LLMDC. Accordingly, the winding up of LLMDC was taken to have commenced on the day the administration began, namely, 10 September 1999: Corporations Act 2001 (Cth), s 513B(d) and s 513C(b).

3. On 11 August 2004, Mr Cant ceased to be liquidator and was replaced as liquidator by Dean Royston McVeigh. In February 2010, the then liquidator Mr McVeigh appointed Ross Andrew McDermott as voluntary administrator of LLMDC. In April 2010, Craig Ivor Bolwell was appointed liquidator of LLMDC in place of Mr McVeigh by order of the Supreme Court of Victoria. On 22 April 2010 the creditors of LLMDC resolved that LLMDC execute a deed of company arrangement. An instrument was later executed by LLMDC, but not by Mr McDermott, the proposed deed administrator. An application to remove Mr McDermott as administrator of LLMDC was dismissed by Davies J in the Supreme Court of Victoria on 20 May 2010. Mr McDermott subsequently resigned as administrator on 2 June 2010. According to the applicants, Andrew Dunner was appointed by the committee of creditors of LLMDC on 12 May 2010 as the deed administrator. Mr Dunner signed the deed of company arrangement some time after 2 June 2010.

4. The applicants say that the terms of the deed of company arrangement have been wholly effectuated but Mr Dunner has failed to certify in writing and lodge with the Australian Securities and Investments Commission (ASIC) a Form 5056 notice to that effect. Mr Dunner was disqualified from acting as a liquidator in August 2013.

Relief sought by the applicants

5. The primary relief sought by the applicants is:

1. an order under s 445G(3) of the Corporations Act 2001 (Cth) dispensing with the requirement that the deed administrator certify in writing and lodge with ASIC a Form 5056 notice that the deed has been wholly effectuated; and

2. an order that instead the applicants be authorised to certify in writing and lodge with ASIC a Form 5056 notice.

6. The applicants also seek the following relief “pending orders 1 and 2 being granted”:

1. an order pursuant to s 482 of the Corporations Act, as made applicable by s 446A(6), terminating the voluntary winding-up of LLMDC which commenced on 10 September 1999;

2. a declaration pursuant to s 90-35 of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act, that a creditors’ meeting held on 7 May 2010 (or 12 May 2010) had authority to appoint Mr Dunner as administrator of the deed of company arrangement and that Mr Dunner was authorised to sign the deed of company arrangement as he did on 14 May 2010;

3. alternatively, an order pursuant to s 445G of the Corporations Act validating the resignation of Mr McDermott as administrator of LLMDC, or his statement that he was retiring, and “[i]f this situation is not detailed in the Corporations Act, then in the interests of justice or in Equity, it be declared as being permissible”;

4. an order pursuant to “UCPR, Sect 57 The Overriding Purpose” granting relief as otherwise sought by the applicants;

5. further or alternatively, order that ASIC replace Mr Dunner with a replacement administrator of the deed of company arrangement to certify in writing the Form 5056 that the DOCA has been wholly effectuated.

Procedural background

7. It is necessary first to say something about the procedural background. Initially, Mr Jorgensen was the sole applicant for relief. He is self-represented and, without intending any disrespect, his first affidavit in support of the application was deficient both in form and substance in explaining what had occurred in the administration and winding-up of LLMDC.

8. On 28 September 2020, Black J directed ASIC, as amicus curiae, or in some other capacity as it may assist, to file and serve an affidavit identifying the information that it can obtain from its records in respect of the matter and to provide a short outline of any legal issues which it can identify from those materials. That occurred and ASIC provided a chronology and an affidavit annexing copies of the documents relating to LLMDC available to it insofar as they are relevant to this application.

9. The application came before me for hearing on 9 November 2020. On that occasion, I outlined to Mr Jorgensen, counsel appearing for ASIC and the solicitor for the liquidator, the apparent difficulties with the application. These included, first whether Mr Jorgensen had standing to make an application under s 445G or s 482, as made applicable by s 446A(7). The evidence at the first hearing did not establish that Mr Jorgensen had standing under s 445G(1) as a member or creditor of LLMDC, or under s 446A(7)(c) or (d) as a creditor or contributory of LLMDC. Second, the deed of company arrangement approved by the creditors at the adjourned s 439A meeting on 22 April 2010 was never signed by the proposed administrator of the deed, Mr McDermott (s 444A(2) and s 444B(5)), and it appeared that the instrument signed by LLMDC never became a deed of company arrangement: s 444B(6).

10. Counsel appearing for ASIC agreed with these observations. I made directions on 9 November 2020 that Mr Jorgensen file and serve any further affidavits in support of his application, together with any amended originating process joining Mantonella Pty Ltd (Mantonella) as an additional applicant, including any application for relief under s 446A(6) of the Corporations Act. An ASIC search showed that Mantonella was a shareholder of LLMDC. Mr Jorgensen said that Mantonella was “his” company.

11. At the adjourned hearing on 30 November 2020, leave was granted to Mr Jorgensen to file an amended originating process joining Mijac as second applicant. The amended originating process asserted that Mijac is the successor trustee of the Jorgensen Family Trust in place of Mantonella, which was deregistered by ASIC in 2018. There is no evidence of these matters. The amended originating process also asserted that Mijac is a prior creditor and now also a post-liquidation creditor of LLMDC.

12. Accepting Mr Jorgensen’s statement that ASIC initiated the deregistration of Mantonella (which I assume was under s 601AB(1) of the Corporations Act), the effect of deregistration is that Mantonella ceases to exist: s 601AD(1). On deregistration, all property that Mantonella held on trust immediately before deregistration vests in the Commonwealth, and all of Mantonella’s property, other than property held by Mantonella on trust, vests in ASIC: s 601AD(1A) and (2). Assuming, as Mr Jorgensen said, that Mantonella was trustee of the Jorgensen Family Trust, and that the shares in LLMDC were held by Mantonella on trust for the Jorgensen Family Trust, the result is that those shares now vest in the Commonwealth: s 601AD(1A).

13. Mijac is not the holder of any shares in LLMDC and therefore does not have standing under s 445G(1) as a member of LLMDC, or under s 446(7)(d) as a contributory of LLMDC. Nor does the evidence establish that Mr Jorgensen is a member or contributory of LLMDC.

14. Nor does the evidence establish that Mr Jorgensen or Mijac was a creditor of LLMDC at the date of commencement of the deemed creditors’ voluntary winding-up which commenced on 10 September 1999. In this regard, the sparse evidence on this application included minutes of the adjourned meeting of creditors of LLMDC on 22 April 2010, which record that the administrator, Mr McDermott, rejected a claim by Mijac to vote as a creditor for $50,000. The minutes also record that the administrator noted that the minutes of meeting held in 1999 by Mr Cant showed that Mr Cant had refused to allow Mr Jorgensen to vote and Mr McDermott rejected Mijac’s claim on the same basis and tabled a copy of the 1999 minutes. Although those earlier minutes were not in evidence on this application, there was no contrary evidence adduced by the applicants.

15. This application might be dismissed on this ground alone. Nevertheless, I will address the substance of the application, given the complexities which have arisen and the importance of identifying the correct legal position, including whether the Court should make an order under s 447A of the Corporations Act, as I foreshadowed at the hearing on 30 November 2020.

History of the external administration in 2010

16. The documents put in evidence by affidavit from an officer of ASIC establish the following in relation to the administration of LLMDC, relevantly, in 2010.

17. On 24 February 2010, Mr McVeigh, as liquidator, appointed Mr McDermott as voluntary administrator of LLMDC pursuant to s 436B of the Corporations Act.

18. On 9 March 2010, Mr McDermott convened the first meeting of creditors under s 436E, where creditors appointed a committee of inspection. On 1 April 2010, Mr McDermott convened a second meeting of creditors which was adjourned. The minutes of that meeting noted that Mr McDermott was not happy for a proposed deed to be voted on because it was not in proper form.

19. On 16 April 2010, the Supreme Court of Victoria ordered that Mr Bolwell be appointed liquidator of the creditors’ voluntary liquidation to replace Mr McVeigh.

20. On 22 April 2010, the adjourned second meeting of creditors resolved to accept a proposed deed of company arrangement. The minutes record that after that resolution, Frank Sanna, the representative of a number of creditors, asked whether “another” administrator could sign the deed of company arrangement and Mr McDermott responded that the resolution for the deed had already been passed and therefore another administrator cannot sign the deed.

21. On 7 May 2010, a meeting of six creditors was held by telephone, including Mr Jorgensen representing Mijac. The minutes of that meeting record that Ms Jimeale Jorgensen as sole director of LLMDC, was voted as “chairman”, and that Mr McDermott be asked to step aside due to irreconcilable differences concerning the level of fees he was demanding for the administration of the deed of company arrangement that had already been approved by creditors. The minutes also record that a resolution was passed in these terms:

That Ross McDermott retire forthwith, as Administrator of the Deed and that another Deed Administrator be appointed, whose fees were of the order of about 15% that of that estimated by Mr McDermott.

22. Mr McDermott sent an email to Mr Sanna on 11 May 2010 informing him that only the liquidator may convene a meeting of creditors and commented that the court process may be available.

23. The minutes of meeting of the “committee of creditors” of LLMDC held on 12 May 2010 record that the committee resolved as follows:

(i)   That Andrew Dunner to be Appointed as Administrator of the Deed and his demanded fee of $5,000 be agreed to.

(ii)   The agreed $5,0000 fee be paid by tomorrow to Dunner, so DOCA is executed by him urgently the next day.

(iii)   Ross McDermott to be removed as Company Administrator soon as possible.

(iv)   Frank Sanna to attend to the proceedings against Mr McDermott for Court Orders removing him.

24. On 13 May 2010, proceedings were commenced in the Supreme Court of Victoria by Barbara Craven, a director of LLMDC, against Mr McDermott seeking to remove him as administrator of LLMDC and appointing Mr Dunner as administrator of LLMDC and administrator of the deed of company arrangement.

25. Mr Jorgensen deposed that on 13 May 2010 Mijac paid $5,000 to “Janine Brodie”, which Mr Jorgensen said was the “fee” paid to Mr Dunner to act as deed administrator. Mr Jorgensen further deposed that at the same time, $80,000 was paid to three priority creditors; G Dumbrell ($30,000), K French ($30,000) and B Craven ($20,000). There is evidence in the form of a bank statement of Mijac with Bank of Queensland which shows payments of $60,000 on 12 May 2010 and $20,000 on 13 May 2010 respectively. Whilst there is no direct evidence of receipt of those amounts by these persons, I am prepared to proceed on the basis, favourably to the applicants, that Mijac paid those amounts in early May 2010.

26. On 14 May 2010, Davies J made an order in the Victorian proceedings that the time by which LLMDC must execute the deed of company arrangement is extended to 27 May 2010.

27. On 20 May 2010, Davies J made orders dismissing the application seeking to remove Mr McDermott as administrator of LLMDC and for indemnity costs in favour of Mr McDermott against Mr Jorgensen and his daughter, Ms Jorgensen, “being the persons responsible for the action being brought”.

28. The deed was not executed by Mr McDermott by 27 May 2010, being the extended date granted by the order made by Davies J on 14 May 2010, or at all.

29. On 2 June 2010, Mr McDermott resigned as administrator and lodged a Form 505 with ASIC. His appointor, the liquidator of LLMDC who was at this time was Mr Bolwell, did not appoint someone else as administrator of LLMDC: s 449C(1)(c) and 2(b)(ii).

30. There is in evidence a deed of company arrangement dated 14 May 2010 prepared by Mr Sanna, and signed by LLMDC and apparently Mr Dunner, as the purported deed administrator. Although the evidence is sparse, the better inference, consistent with the applicants’ submission, is that the deed was most likely signed by LLMDC by 27 May 2010. There is no direct evidence of the date of signing by Mr Dunner. On the available evidence, the inference to be drawn is that Mr Dunner signed the deed of company arrangement at the request of Mr Sanna after Mr McDermott resigned as administrator of LLMDC on 2 June 2010: see [32] below.

31. On 4 June 2010, Mr McDermott issued a circular to creditors advising that although a deed of company arrangement was approved by the creditors, a valid deed was never executed by LLMDC and that LLMDC was being handed back to its liquidator.

32. The deed of company arrangement was lodged with ASIC, probably by Mr Sanna, on 18 November 2010. During 2011, ASIC made enquiries of Mr Sanna and Mr Dunner about the signing of the deed. According to file notes made by officers of ASIC, Mr Dunner initially informed an ASIC officer that he never signed the purported deed. Later Mr Dunner informed an ASIC officer that he signed a document that may have been a copy of the deed, but he could not recall who had witnessed it. Mr Sanna informed the ASIC officer that the deed was signed by Mr Dunner after Mr McDermott had resigned as administrator. As indicated, in August 2013 Mr Dunner was disqualified from acting as a liquidator. Ultimately, ASIC removed the deed which had been lodged for registration.

The terms of the purported deed of company arrangement

33. The deed contains a number of drafting inconsistencies. In the definitions provision in cl 1, the “Administrator” is defined as Ross McDermott and the “Deed administrator” is defined as Andrew Dunner. Clause 3.1 of the deed provides that LLMDC appoints an Administrator of the deed and the Administrator accepts the appointment as the Administrator of this deed as from the date of his appointment as Administrator of the deed. In that provision, the expression “Administrator” means Mr McDermott, but plainly Mr McDermott did not sign the deed. Other clauses of the deed use the expression “Administrator” and “Deed Administrator” interchangeably without any consideration of what was intended: see, for example, cll 10, 11, 12, 13, 14, 15, 16, 18, 19 and 28.

34. Under the terms of the deed a fund was to be provided by shareholders in the sum of $104,500, of which $15,500 was said to have already been paid to the administrators and solicitor. The fund was to be paid in accordance with cl 6.1 directly to three priority creditors, with the balance paid to the administrator of the deed within 30 days of the deed being executed: cl 5.1. Clause 6.1 provided that the fund of $104,500 was to be applied as follows:

1. first in payment of the three priority creditors who are owed money for past wage costs, stemming back to August 1999, being B Craven ($20,000), K French ($30,000), and G Dumbrell ($30,000) and that the three priority creditors had agreed to cap their amount payable from the deed to those fixed amounts;

2. second, in payment of the administrator’s and legal fees approved by the committee of creditors of which $15,500 had already been paid;

3. third, in payment of the balance of the $104,500 fund to the unsecured creditors of LLMDC.

35. Clause 13(a) provided in the event that the deed is terminated, and subject to a successful s 482, Corporations Act application, as referred to in cl 27, then LLMDC is to be handed back to the director’s control.

36. Clause 16 provided that if the administrator of the deed has paid to creditors their full entitlements under the deed and the deed terminates in accordance with cl 16(a), all claims are released in full and extinguished.

37. Clause 28 provided that as soon as practicable, or within statutory time limits, if applicable, the deed administrator, or creditor(s), or contributory will make application under s 482 of the Corporations Act to the relevant court to terminate the winding up of LLMDC pursuant to s 482.

The applicants’ submissions

38. The applicants submitted that the Court should grant the relief sought essentially for the following reasons:

1. the creditors’ meeting held on 7 May 2010 or the meeting of the committee of creditors held on 12 May 2010 was effective to remove Mr McDermott as administrator of LLMDC and to appoint Mr Dunner as administrator of LLMDC and also deed administrator of the deed of company arrangement approved by creditors on 22 April 2010;

2. the terms of the deed have been effectuated because the applicants, in particular, Mijac, has paid amounts totalling $85,000 of which $80,000 was paid directly to three priority creditors and $5,000 was paid to Mr Dunner as his fee to act as deed administrator;

3. it was only the subsequent disqualification of Mr Dunner as a liquidator in 2013 that precluded him from certifying in writing to ASIC that the deed has been wholly effectuated;

4. in the circumstances, the applicants should be authorised to certify in writing and lodge with ASIC a Form 5056 notice that the deed has been wholly effectuated. Alternatively, the Court should order that ASIC replace Mr Dunner with another administrator of the deed of company arrangement to sign the Form 5056 certifying that the deed has been wholly effectuated;

5. if this relief is not available under the Corporations Act, the Court should grant the relief sought “in the interests of justice or in equity” or pursuant to the “just, quick and cheap” overriding purpose of s 56 of the Civil Procedure Act 2005 (NSW).

The legal position

39. The legal position with respect to the purported deed of company arrangement is as follows.

40. The administrator of LLMDC is to be the administrator of the deed, unless the creditors, by resolution passed at the meeting, appoint someone else to be administrator of the deed: s 444A(2). The “meeting” referred to in s 444A(2) is the meeting convened under s 439A at which creditors resolve that LLMDC execute a deed of company arrangement: s 444A(1). In this case, the creditors did not resolve at the s 439A meeting held on 22 April 2010 to appoint someone else to be the administrator of the deed. Accordingly, as administrator of LLMDC, Mr McDermott was to be the administrator of the deed.

41. The administrator of LLMDC must prepare an instrument setting out the terms of the deed: s 444A(3). It seems that this did not occur, as the deed was prepared by Mr Sanna who was not acting for Mr McDermott. Mr Sanna was the solicitor acting for Ms Craven in the Victorian proceedings which sought to remove Mr McDermott as administrator of LLMDC.

42. The time of execution of the deed is specified in s 444B. LLMDC must execute the instrument within 15 business days after the end of the meeting of creditors, or such further period as the court allows on an application made within those 15 days: s 444B(2). Here, the Victorian Supreme Court extended time on 14 May 2010 for execution of the deed by LLMDC to 27 May 2010. As I have said, I accept Mr Jorgensen’s submission that LLMDC signed the deed by 27 May 2010.

43. The proposed administrator of the deed must execute the instrument before, or as soon as practicable after, LLMDC executes it: s 444B(5). That did not occur here because Mr McDermott, never signed the deed. In these circumstances, the instrument never became a deed of company arrangement because it was not signed by both LLMDC and Mr McDermott: s 444B(6).

44. Since Mr McDermott resigned as administrator on 2 June 2010, it is necessary to consider s 449C(1) which provides:

(1) Where the administrator of a company under administration:

(a)   dies; or

(b)   becomes prohibited from acting as administrator of the company; or

(c)   resigns by notice in writing given to his or her appointer and to the company;

his or her appointer may appoint someone else as administrator of the company.

45. Mr McDermott’s appointor was Mr McVeigh, the then liquidator of LLMDC. Mr Bolwell as the successor liquidator of LLMDC had power to appoint a replacement administrator under s 449C(2)(b)(ii). He did not do so.

46. Section 435C(3) provides that, in addition to the normal outcome of administration specified in s 435C(2), the administration of a company may end for other reasons. Section 435C relevantly provides:

435C When administration begins and ends

…

(2)   The normal outcome of the administration of a company is that:

(a)   a deed of company arrangement is executed by both the company and the deed’s administrator; or

(b)   the company’s creditors resolve under paragraph 439C(b) that the administration should end; or

(c)   the company’s creditors resolve under paragraph 439C(c) that the company be wound up.

(3)   However, the administration of a company may also end because:

(a) the Court orders, under section 447A or otherwise, that the administration is to end, for example, because the Court is satisfied that the company is solvent; or

…

(f)   the company contravenes subsection 444B(2) by failing to execute a proposed deed of company arrangement; or

…

47. There are two possibilities in this case.

48. The first is that a company is taken to transition to a deemed creditors’ voluntary winding-up under s 446A(1)(b), if, relevantly:

(b) a company under administration contravenes s 444B(2) at a particular time.

49. The circumstance contemplated by s 435C(3)(f) is complementary with s 446A(1)(b), however, the latter provision is not engaged in this case because I accept the applicants’ submission that the deed was executed by LLMDC by no later than 27 May 2010. Accordingly, there was no contravention by LLMDC of s 444B(2), and LLMDC did not transition to a (second) deemed creditors’ voluntary winding up under s 446A(1)(b).

50. The second possible outcome is that provided by s 435C(3) that the Court orders, under section 447A or otherwise, that the administration is to end. The normal outcome of the administration of LLMDC, is either (a) a deed of company arrangement is executed by both LLMDC and the deed administrator, or (b) LLMDC’s creditors resolve under s 439C(b) that the administration should end, or (c) LLMDC’s creditors resolve under s 439C(c) that LLMDC be wound up. None of those outcomes occurred in this case: s 435C(2).

51. Accepting that LLMDC executed the deed on or before 27 May 2010, but the deed administrator did not sign the deed, then the time and manner by which the administration of LLMDC may end is left, in the present case, to an order under s 447A or otherwise.

Section 447A

52. Section 447A(1) provides that the Court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. In particular, the Court may order that the administration of LLMDC should end, either because LLMDC is solvent, or because provisions of Pt 5.3A are being abused, or for some other reason: s 447A(2).

53. Here, there is some other reason to make an order under s 447A. The administrator, Mr McDermott, resigned on 2 June 2010 and his appointor, the liquidator, did not appoint a replacement administrator (s 449C(2)(b)(iii)). Moreover, no application has been made to the Court under s 449C(6) by ASIC, or an officer, member or creditor of LLMDC to appoint an administrator of LLMDC.

54. The persons with standing to apply for an order under s 447A include LLMDC, ASIC or any other interested person: s 447A(4). The expression “any other interested person” is to be interpreted broadly: Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd [2020] FCA 1395 at [401] (Beach J). In this case, the liquidator would be an interested person: Chief Commissioner of State Revenue v Rafferty’s Resort Management Pty Ltd (in liq) [2008] NSWSC 452; (2008) 66 ACSR 199 at [27].

55. The powers of the Court under s 447A are wide, but as the High Court has said are not entirely without limit: Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 at [20]. Although the words in s 447A(1) “is to operate” appear futuristic, they do not preclude the court from making an order that has future effect in relation to past matters or past events: Australasian Memory Pty Ltd v Brien at [26]; Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (admins apptd)(No 2) [2020] FCA 472 at [39] (Markovic J).

56. Despite the Court raising the possibility of a s 447A application with the liquidator’s solicitor at the hearing on 9 November 2020, no application for relief under s 447A(1) has yet been made by the liquidator. Nor has ASIC made an application.

57. If an application were made by a person with standing to apply for relief under s 447A, then subject to hearing any argument to the contrary from any interested person, it is likely that the Court would make an order under s 447A(1) that Pt 5.3A is to operate in relation to LLMDCC as if the administration of LLMDC came to an end on 2 June 2010, being the date when Mr McDermott resigned as administrator.

Other matters

58. Turning to the various submissions of the applicants.

Validation of deed of company arrangement under s 445G

59. Section 445G is in these terms:

445G When Court may void or validate deed

(1)   Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed, a member or creditor of the company, or ASIC, may apply to the Court for an order under this section.

(2)   On an application, the Court may make an order declaring the deed, or a provision of it, to be void or not to be void, as the case requires, on the ground specified in the application or some other ground.

(3)   On an application, the Court may declare the deed, or a provision of it, to be valid, despite a contravention of a provision of this Part, if the Court is satisfied that:

(a)   the provision was substantially complied with; and

(b)   no injustice will result for anyone bound by the deed if the contravention is disregarded.

(4)   Where the Court declares a provision of a deed of company arrangement to be void, the Court may by order vary the deed, but only with the consent of the deed’s administrator.

60. As indicated, the evidence does not establish that the applicants have standing as either a member or creditor of LLMDC to make application for relief under s 445G(3).

61. In any event, assuming that the applicants have standing under s 444G(1), s 445G only applies once a deed of company arrangement has been executed: Petrochemical Industries Ltd v Dempster Nominees Pty Ltd (1994) 15 ACSR 468 at 108. That is not the present case. See also Re Connections Total Fitness for the Family Pty Ltd (administrator appointed) [2014] NSWSC 75 at [42], where Petrochemical Industries was cited with approval in the context of a similar provision, s 445D.

62. Further, assuming that s 445G(3) was engaged in the present case, there is no substantial compliance (in terms of s 445G(3)(a)) which would enable the making of an order under s 445G to cure non-compliance with s 445B(5): Australian Guarantee Corporation v Lawrence (1999) 17 ACLC 1,226 at [38] (O’Bryan J) referring to Deputy Federal Commissioner of Taxation v Comcorp Australia (1996) 21 ACSR 590 at 628 (Carr J). Section 444B(5) was not substantially complied with, because Mr McDermott never purported to sign the deed: MYT Engineering v Mulcon (1997) 140 FLR 247; 25 ACSR 78 at 80 (Handley JA) (overturned by the High Court on different grounds).

7 May 2010 creditors meeting

63. The applicants say that the meeting of creditors on 7 May 2020 was effective to remove Mr McDermott as administrator of LLMDC. There are at least three difficulties with this submission.

64. First, the status of Mr McDermott as administrator of LLMDC was the subject of determination in the Victorian proceedings. The application to remove Mr McDermott as administrator of LLMDC pursuant to s 449B was dismissed on 20 May 2010.

65. Second, it was the liquidator of LLMCDC as the “appointer” of Mr McDermott as administrator of LLMDC, not the creditors, who had the power to replace Mr McDermott when he resigned as administrator: s 449C(2)(b)(ii). As indicated, the liquidator did not exercise this power. The resolution of creditors of 7 May 2010 was of no effect.

66. Third, the meeting of creditors on 7 May 2010 did not have power to appoint Mr Dunner as deed administrator of LLMDC, since it was not a meeting of creditors convened under s 439A, at which the creditors resolved that LLMDC execute a deed of company arrangement: s 444A(2).

12 May 2010 committee of creditors’ meeting

67. Next, the applicants say that the meeting of the committee of creditors on 12 May 2010 appointed Mr Dunner as deed administrator of LLMDC. That is not so. The committee of creditors did not have power to appoint Mr Dunner or any person as deed administrator. That is for two reasons. The first reason is that referred to in [66] above. The second is that the function of a committee of creditors of the company is consulting with the administrator about matters relating to the administration and considering the administrator’s reports, but cannot give directions to the administrator as to the conduct of the administration, except as to when the administrator must report to the committee: see s 436F which was replaced with effect from 1 March 2017 by Dvn 80 of the Insolvency Practice Schedule (Corporations).

68. In the circumstances, Mr Dunner was not authorised to sign the instrument as deed administrator, and since the instrument signed by LLMDC never became a deed of company arrangement, there is no basis for the Court to order, as sought by the applicants, that ASIC replace Mr Dunner with another deed administrator for the purpose of that other person certifying in writing that the deed has been wholly effectuated.

69. None of the emails between ASIC and Mr Bolwell exhibited to Mr Jorgensen’s affidavit of 14 December 2020 assist the applicants’ claims for relief. Those emails reveal that ASIC did not answer the liquidator’s question in an email of 29 November 2011 as to whether ASIC had reached any conclusion “as to whether a valid Deed of Company Arrangement is in existence” and that ASIC informed the liquidator on 5 December 2011 that it was unable to provide a position on the liquidator’s decision to finalise the liquidation, and the liquidator would need to seek his own independent advice.

70. Insofar as the applicants’ referred to the “interests of justice” or “equity” or s 56 of the Civil Procedure Act, there is no basis for granting the relief sought. The applicants’ submission that the Court is acting as “prosecutor” in raising technical objections to the grant of relief sought that had not been raised by the liquidator or ASIC, is misconceived. That submission misunderstands the role and function of the Court, which is obliged to apply the law according to its terms having regard to the evidence adduced on the application.

71. Further, it is to be observed that neither the liquidator nor ASIC supported the relief sought by the applicants. And as indicated at [10] above, counsel appearing for ASIC as amicus on 9 November 2020 agreed with the Court’s preliminary observations as to the difficulties confronting the application.

Termination of winding up

72. Section 446A(6) provides that s 482 applies in relation to a deemed creditors voluntary winding-up as if it were a winding-up in insolvency or by the Court. Section 481(1) provides that at any time during the winding-up of a company, the Court may, on application, make an order staying the winding-up either indefinitely or for a limited time or terminating the winding-up on a day specified in the order.

73. Standing to make an application under s 482, as applying because of s 446A(6), is given to LLMDC pursuant to a resolution of the Board (despite s 198G, which restricts the exercise of powers while a company is under external administration), the liquidator, a creditor or a contributory: s 446A(7).

74. As indicated, the evidence does not establish that either Mr Jorgensen or Mijac is a creditor or a contributory of LLMDC. Insofar as Mijac claims to be a post-liquidation creditor by reason of amounts paid either to Mr Dunner or to certain priority creditors with respect to the proposed deed of company arrangement that will not suffice to give Mijac standing as a creditor for the purposes of an application under s 482.

75. Further and in any event, in circumstances where the liquidators’ Form 524 accounts and statement dated 22 December 2010 records unsecured debts of $203,964.94, the unchallenged statement by the solicitor for the liquidator on this application is that there are amounts outstanding to creditors of LLMDC in the order of $155,000 and no evidence to the contrary was adduced by the applicants, the applicants have not established a case for termination of the winding-up of LLMDC.

Conclusion and Orders

76. My conclusions may be summarised as follows.

77. The administrator of LLMDC was Mr McDermott. At the adjourned meeting of creditors convened under s 439A on 22 April 2010, which approved the deed of company arrangement, the creditors did not resolve to appoint someone else to be the administrator of the deed of company arrangement. The subsequent resolution of a meeting of creditors on 7 May 2020 was ineffective to remove Mr McDermott as administrator of LLMDC, or to appoint someone else, such as Mr Dunner, as administrator of the deed.

78. The instrument which was prepared by Mr Sanna and executed by LLMDC was never signed by Mr McDermott, as the administrator of the deed: s 444B(5). Accordingly, the instrument never became a deed of company arrangement: s 444B(6).

79. Accepting that LLMLDC executed the instrument by 27 May 2010, being the date extended by order of the Supreme Court of Victoria on 14 May 2010, LLMDC did not contravene s 444B(2) and hence did not transition into a (second) deemed creditors’ voluntary winding-up under s 446A(1)(b).

80. After Mr McDermott resigned as administrator of LLMDC on 2 June 2010, the liquidator did not fill the vacancy in the office of administrator by exercising his power to appoint an administrator under s 449C(2)(ii). Since the administration did not end in any of the three outcomes referred to in s 435C(2), the administration of LLMDC may end when the Court orders, under s s447A or otherwise, that the administration is to end: s 435C(2)(a).

81. The Court cannot make orders under s 447A(1) in the absence of an application by a person with standing to seek such relief. No person with standing under s 447A(4), such as ASIC, or an interested person, such as the liquidator of LLMDC, has yet made application to the Court that it should exercise its power under s 447A(1) to make an order about how Pt 5.3A is to operate in relation to LMMDC.

76. If such an application were made by a person with standing under s 447A(4), then subject to hearing any argument to the contrary advanced by any interested person, it is likely that the Court would make an order in the following terms:

Order under s 447A(1) of the Corporations Act 2001 (Cth) that Pt 5.3A of the Corporations Act is to operate in relation to the company in such a way that the administration of the company came to an end on 2 June 2010 upon the resignation of Mr Andrew McDermott as the administrator of the company.

83. A copy of these reasons will be provided to the liquidator as the defendant to the application in the ordinary course. A direction will also be made that a copy of the reasons be provided to ASIC for its consideration.

84. The Court makes the following orders:

1. The amended originating process is dismissed.

2. Direct that a copy of these reasons be provided to the Australian Securities and Investments Commission (ASIC) for its consideration.

3. Reserve for further consideration any application by the liquidator of Lawrenson Light Metal Diecasting Pty Limited (in liq), or ASIC, for relief under s 447A of the Corporations Act 2001 (Cth), provided that any such application is made by filing an interlocutory process no later than 30 January 2021, with notice to Mr Jorgensen and Mijac Investments Pty Ltd.

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Amendments

16 December 2020 - [12] - four references to "LLMDC" amended to read "Mantonella".

17 December 2020 - Parties: Delete "Craig Bolwell (Liquidator) (Defendant) and replace with "Lawrenson Light Metal Diecasting Pty Ltd (in liq) (Defendant)"

[30] - amend reference to "[31]" to read "[32]"

23 December 2020 - "Representation": typographical errors amended

Decision last updated: 23 December 2020