In the matter of Riverside Spares Pty Ltd (in liquidation)

[2020] NSWSC 839

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Riverside Spares Pty Ltd (in liquidation) [2020] NSWSC 839

Hearing dates:

25 June 2020

Date of orders:

25 June 2020

Decision date:

25 June 2020

Jurisdiction:

Equity

Before:

Emmett AJA

Decision:

Order that:

1. Pursuant to r 6.24 of the Uniform Civil Procedure Rules 2005 (NSW), Mr Barry Taylor in his capacity as liquidator of Riverside Spares Pty Ltd (in liquidation) (the Liquidator), be joined as Second Plaintiff to these proceedings.

2. Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), approval is granted:

a.   nunc pro tunc for the Liquidator to enter into (including on behalf of the First Defendant) and to cause the First Defendant to enter into the Deed of Agreement appearing at pp 2 to 10 of Exhibit BT-1 to the affidavit of Mr Barry Taylor sworn on 4 June 2020; and

b.    for the Liquidator to enter into (including on the Company’s behalf) and to cause the First Defendant to enter into the Lease appearing at pp 11 to 41 of Exhibit BT-1 to the affidavit of Mr Barry Taylor sworn on 4 June 2020.

3.   The costs associated with this application be costs in the winding up of the First Defendant.

4. Pursuant to s 7 of the Court Suppression and Non-Publication Orders Act 2010 (NSW), on the ground that it is necessary to prevent prejudice to the proper administration of justice, until further order or the conclusion of the liquidation of the First Defendant, whichever is the latter, Exhibit 1 (being the letter from Dunbar Partners to Mr Barry Taylor dated 25 March 2020) is not to be published or disclosed to any person, save for any disclosure deemed necessary by the Liquidator, his staff or legal representatives.

Catchwords:

CORPORATIONS — Winding up — Conduct of liquidation — Court-appointed liquidator — Powers of liquidator to enter deed and lease on behalf of company — Application for Court approval under Corporations Act 2001 (Cth) s 477(2B)

Legislation Cited:

Corporations Act 2001 (Cth) ss 461(1)(k), 477(2B)

Court Suppression and Non-Publication Orders Act 2010 (NSW) s 7

Uniform Civil Procedure Rules 2005 (NSW) r 6.24

Category:

Principal judgment

Parties:

Oreste Bercich (Plaintiff)
Riverside Spares Pty Ltd (in Liq) (First Defendant)
Giovanni Bercich (Second Defendant)
Dino Bercich (Third Defendant)
Nancy Bercich (Fourth Defendant)
Barry Taylor in his capacity as liquidator of Riverside Spares Pty Ltd (in Liq) (Applicant)

Representation:

Counsel:
J Hynes (Applicant)

Solicitors:
Bridges Lawyers (Applicant)

File Number(s):

2018/393120

EX TEMPORE Judgment

1. HIS HONOUR: The present application has been brought by Mr Barry Taylor (the Liquidator), who is the liquidator of Riverside Spares Pty Ltd (the Company). The Liquidator was appointed by the Court as liquidator on 18 November 2019 on the grounds referred to in s 461(1)(k) of the Corporations Act 2001 (Cth) (the Act), following acknowledgement by the members of the Company that there was an irreconcilable breakdown in the relationship between them.

2. The Company is the registered proprietor of a parcel of land situated in Riverside Road, Chipping Norton (the Property), which is zoned for heavy industrial use. The Property is presently occupied by Cosmo Cranes & Rigging Pty Ltd (Cosmo Cranes) under a holding over provision in a lease granted by the Company to Cosmo Cranes for a term commencing on 1 May 2017, terminating on 30 April 2020 (the Original Lease). The annual rent under the Original Lease was $400,000 plus GST subject to annual review in accordance with the terms of the Original Lease.

3. The Original Lease provided for an option to renew for a further term of three years. On 7 June 2019, Cosmo Cranes exercised the option. Although the notice of exercise is dated 16 May 2019, it was not served on the Company until 7 June 2019. There appears to be no reason to doubt that the notice of exercise respectively exercised the option conferred by the Original Lease.

4. Following his appointment, the Liquidator has taken steps to sell the Property. Following receipt of advice from a property consultant and valuer and from his solicitors, the Liquidator formed the view that a prospective purchaser of the Property would be likely to place additional value on it if there was a current lease in favour of Cosmo Cranes. However, on consideration of the terms of the Original Lease, the Liquidator formed the view that it would be desirable to endeavour to re-negotiate some of the language used in the Original Lease for the purposes of preparation of a new lease following the exercise of the option. That renegotiation was undertaken in consultation with Cosmo Cranes and an accord was reached between the Liquidator and Cosmo Cranes as to the terms of a proposed lease to be granted pursuant to the exercise of the option.

5. On 4 June 2020, the Company, Cosmo Cranes, and the Liquidator entered into a deed of agreement (the Deed). By the Deed, the Company agreed to grant, and Cosmo Cranes agreed to accept the grant of, a lease in the form of the document annexed to the Deed (the Option Lease). The obligation under the Deed to enter into the Option Lease was subject to, and conditional on, the Liquidator obtaining approval pursuant to s 477(2B) of the Act to enter into the Option Lease on terms acceptable to the Liquidator in his absolute discretion (the s 477 Approval). Section 477(2B) relevantly provides that, except with the approval of the Court or of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf if the term of the agreement may end, or obligations of a party to the agreement may be discharged by performance, more than three months after the agreement was entered into, even if the term may end or the obligations may be discharged within those three months.

6. The Option Lease is to take effect from the date on which the Liquidator’s solicitor notifies Cosmo Cranes that the Liquidator has obtained the s 477 Approval. The term of the Option Lease is three years from 1 May 2020 to 30 April 2023. Accordingly, it is clearly within s 477(2B) of the Act.

7. The Deed provides that, if prior to the date on which completion of the sale of the Property by the Company occurs, the s 477 Approval has not been obtained, then either the Company or the Liquidator may, by notice in writing to Cosmo Cranes, rescind the Deed. There is no time by which such a sale might be completed. Hence, it is clearly possible that the obligations under the Deed may be performed more than three months after its date. For that reason, it also falls within s 477(2B).

8. By interlocutory process dated 11 June 2020 and filed in the winding up proceedings, the Company sought orders under s 477(2B) of the Act. The Liquidator is a necessary party to such an application. However, the Liquidator was a not party to the winding up proceedings and it is appropriate that he be joined as a party to them.

9. The Liquidator has arranged for the interlocutory process and his affidavit in support to be served on the plaintiff and defendants in the winding up proceedings. The plaintiff is a shareholder and three of the defendants are also shareholders of the Company, which is the first defendant. The Liquidator has also arranged for the interlocutory process to be served on the four known creditors of the Company and on Cosmo Cranes. The plaintiff and the defendant shareholders have all indicated that they do not oppose the making of the orders sought by the Liquidator. One of the four creditors has indicated support for the application. The other three creditors have not responded indicating any opposition. Cosmo Cranes supports the application.

10. The Liquidator has received written advice that the rent that has been agreed with Cosmo Cranes to be payable under the Option Lease is equal to or above the market rent for the Property. It is appropriate to direct that the evidence of that advice remain confidential.

11. In all of the circumstances I consider that it is appropriate to make orders under s 477(2B) of the Act giving approval nunc pro tunc for the Liquidator to enter into and cause the Company to enter into the Deed and giving approval for the Liquidator to enter into on behalf of the Company and to cause the Company to enter into the Option Lease. The application was made to the Court rather than to a committee of inspection or by way of seeking the resolution of the creditors on the basis that it is the most cost-effective way of obtaining approval. I see no reason to doubt that contention. Accordingly, it is appropriate that the Liquidator’s costs of making this application be paid out of the assets of the Company on the winding up as an expense of the winding up.

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Decision last updated: 01 July 2020