In the matter of Pats Consulting Pty Ltd

[2015] NSWSC 497

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Pats Consulting Pty Ltd [2015] NSWSC 497
Hearing dates:	23 February 2015
Date of orders:	23 February 2015
Decision date:	23 February 2015
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Proceedings adjourned; application for stay of winding up, appointment of special purpose liquidator and production of documents refused.
Catchwords:	CORPORATIONS – winding up – stay of winding up – where stay sought to prevent deregistration by ASIC and permit appointment of special purpose liquidator – inappropriateness of appointing special purpose liquidator – inappropriateness of stay. CORPORATIONS – extend administration – winding up – production of company books – Corporations Act, s 486 – where order sought against former company director – held, power to order production applies only to books in possession of liquidator
Legislation Cited:	(Cth) Corporations Act 2001, s 473(7), s 482, s 486, s 561, s 588S, s 601AB
Category:	Procedural and other rulings
Parties:	Brendan Ritson (plaintiff) Pats Consulting Pty Ltd (defendant)
Representation:	Counsel: S Mitchell (plaintiff) No appearance (defendant) Solicitors: Mitchell Lawyers (plaintiff)
File Number(s):	2012/386999

Judgment (ex tempore)

1. HIS HONOUR: The defendant company Pats Consulting Pty Ltd was wound up in insolvency by order of the court made on 19 March 2013 at the suit of the plaintiff Brendan Ritson, whereupon John Maxwell Morgan was appointed liquidator.

2. The plaintiff is a creditor of the defendant in respect of a judgment debt under a judgment of the Federal Magistrates Court for damages for misleading and deceptive conduct, and costs orders made by that court in the same proceedings. During the course of the winding up, the plaintiff corresponded with the liquidator on numerous occasions, and inter alia sought to have assigned to him causes of action which he says the company has against its former director Mr Jonathan Laurence Ryan. The evidence does not reveal what if any amount the plaintiff offered to pay the liquidator for such an assignment. The liquidator insisted that the plaintiff obtained counsel's advice as to the viability of the causes of action of which an assignment was sought. The plaintiff declined to fund the obtaining of such advice.

3. The liquidator then determined to bring the winding up to an end, and on or about 20 March 2014 lodged with ASIC a request for deregistration pursuant to (Cth) Corporations Act 2001, s 601AB, together with notice of his resignation as liquidator. It would therefore appear that the liquidator has resigned. In those circumstances, it would be open to the court to appoint a replacement liquidator pursuant to Corporations Act, s 473(7).

4. By an amended interlocutory process filed on 23 January 2015, the plaintiff claims an order staying the winding up pursuant to s 482; an order that a special purpose liquidator be appointed to replace the liquidator, for the limited purpose of considering the assignment of the defendant's causes of action against Mr Ryan to the plaintiff; an order that the plaintiff file a consent of liquidator; an order pursuant to Corporations Act, s 486, that the company's books be made available for inspection by the plaintiff; a declaration that various causes of action sought to be assigned to the plaintiff are not frivolous and vexatious; a declaration that the plaintiff has given notice to Mr Morgan, the former liquidator, pursuant to Corporations Act, s 588S; and various other relief which it is not necessary to address at this point.

5. First, as it seems to me, the application for a stay of the winding-up is misconceived. A stay under Corporations Act, s 482, essentially involves the cessation of the winding up for the time being, and the return of the company to the control of its directors, often as a precursor to the termination of the winding-up. That is not what is intended here, and there is no basis shown for a stay under Corporations Act, s 482. It seems more likely that what is intended is an extension of the time within which the company would otherwise be deregistered.

6. Section 601AB(2) provides that ASIC may deregister a company if the company is being wound up, and ASIC has reason to believe that the company's affairs have been fully wound up under Part 5.4, and the company has no property, or not enough property, to cover the costs of obtaining a court order for the company's deregistration. It was to invoke that section that the liquidator made his application to ASIC. ASIC, having given the requisite notice under s 601AB(3), is entitled to deregister the company when two months have passed after publication of that notice. Section 601AB makes clear, however, that ASIC may refuse to deregister the company notwithstanding such an application, and notwithstanding the giving of such notice.

7. Following application made to it by the plaintiff, ASIC on 12 September 2014 advised that deferral of the registration of the company had been approved, and the period extended by 180 days from the date of that notice. The letter also advised, "If a further deferral is required you should submit a new application to this office before the end of the extended period". It seems to me that, that notice being dated 12 September, the 180 days will expire on or about 10 March 2015. Section 601AB does not give the court any power to direct ASIC in that respect. It may be that such a power could be found in some provision of the Act, but it is not currently apparent to me. In any event, it seems to me that any application for a further extension should be made, as ASIC indicated in the letter to which I have referred, to ASIC.

8. The application for the appointment of a special purpose liquidator is also misconceived. A special purpose liquidator is appointed where there is a general purpose liquidator in office and it is necessary to carve out some part of the responsibilities of the liquidator due to some conflict of interest, and vest that in a special purpose liquidator. In circumstances where the liquidator has resigned and no liquidator is acting, the appropriate course is simply to appoint a replacement liquidator, rather than to appoint a special purpose liquidator. However, the court is unable to appoint a liquidator at this stage because there is no consent of a liquidator to act.

9. I would be inclined to appoint a replacement liquidator upon provision to the court of the consent by a liquidator to act. I do not think it appropriate simply to appoint a liquidator from the roster without a consent, especially because of the particular circumstances of this appointment and what it will involve, and that another official liquidator has come to the view that the liquidation should come to an end. But if an official liquidator can be found who is prepared to accept an appointment, then I would be prepared to appoint that person as a replacement liquidator.

10. So far as concerns the order for production under s 486, that section is concerned with the company's books that have come into the possession of the liquidator. It is not concerned with books that might be retained by a director extraneously to the liquidator. Section 561, on the other hand, is concerned with the liquidator's own books and records, whereas s 486 is concerned with the company's books which have come into the possession of the liquidator. It does not authorise an order against Mr Ryan for production of what he may retain. It would authorise an order that the company's books in the possession of the liquidator be made available for the inspection of the applicant, but were such an order to be made, it should be made on notice to the liquidator who has possession of those books. If a new liquidator is appointed, then the new liquidator would be entitled to obtain those books from the former liquidator and such an order might be unnecessary.

11. So far as the declarations that various causes of action are not frivolous or vexatious are concerned, I have never heard of a court making such a declaration, and for various reasons relating to the availability of and discretionary limits on declaratory relief, I cannot conceive why the court would make such a declaration. In particular, it would not likely to do so in the absence of clear and satisfactory service of the proceedings on Mr Ryan, which has been not been established.

12. For those reasons I am not prepared to grant any of the relief sought on the application at this stage. As I have indicated, I would be inclined to appoint a replacement liquidator if the consent of a liquidator to act is furnished. For that purpose, if so desired, I am prepared to adjourn the interlocutory process to a date to enable such a consent to be brought in.

13. The court orders that the proceedings be adjourned to Monday 9 March 2015 at 9.45 am in the Corporations Judge’s motions list.

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Decision last updated: 01 May 2015