Lanson Investments P/L v Murray River F.M. P/L

[1993] FCA 1038

103          4s

JUDGMENT NO. * *ae * re *e * *a * * *n / .r*.*e*****

CATCHWORDS

CORPORATIONS - winding up - statutory demand - proposed cross- claim - whether any prospect of success - administration - whether company under administration - whether directors had resolved as to their opinion of solvency of company and that administrator should be appointed - meeting of two of seven directors - another four directors ratifying resolution in writing - whether in interests of company's creditors for administration (if any) to continue - company unable to pay its debts.

Corporations Law ss. 4 3 6 A , 440A & 4 4 0 D .

D a t e :  1ST DECEMBER 1993

LANSON INVESTMENTS PTY. LTD. V. MlJRRAY RIVER F.M. PTY, LTD.

NO. VG	3 2 6 0 of	1 9 9 3
Judge	:	GRAY J.

Place: MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA )

VICTORIA DISTRICT REGISTRY	1	VG.No. 3260 of 1993
GENERAL DIVISION	1

IN THE MATTER OF MURRAY RIVER F.M. PTY LTD

LANSON INVESTMENTS PTY LTD

ACN 008 145 113

Applicant

- and -

MURRAY RIVER F.M. PTY LTD

ACN 008 063 607

Respondent

JUDGE :	GRAY J
PLACE	: Melbourne
DATE :	1st December 1993

1

EX TEMPORE REASONS FOR JUDGMENT

I am of the view that I should grant the application /

to wind up the company. I will summarise as succinctly as I can the reasons for the various steps in my reasoning leeding to that view.

The application is based on a statutory demand. No

: application was made to set aside that statutory demand. The

' company cannot therefore rely on any ground on which it could

have relied in setting aside the statutory demand without the

leave of the Court. Even though I am satisfied that the ground on which the setting aside of the statutory demand is sought is material to proving that the company is solvent, I still would not grant leave to rely on it.

My reasons for that conclusion are that my examination of the proposed cross-claim which has been filed, and the correspondence on which it is largely based, indicate to me that it has no material prospect of success at all. The proposed cross-claim is based on the proposition that delay which occurred in the allotment of certain shares was due to delay until 29th January 1993 in the giving of approval for that allotment by the applicant. It is difficult to point to the actual period of delay alleged, because the correspondence of October and December is not very clear as to exactly what

is sought in the way of approval. Changes in what is sought

are evident from time to time in that correspondence.

It is also suggested that there ought to have been have given approval by 31st December. I can find nothing that	some knowledge on the part of the applicant that it should
justifies the making of that allegation. In substance, if there were anything that could be said in respect of delay, it would have to be said, in my view, by the company River Murray Broadcasting Pty Ltd. The attempt to convert whatever rights that company may have into a cross-claim involving Murray
,	River FM Pty Ltd, the company which is the subject of this winding-up proceeding, is merely a colourable attempt to draw

in some benefit to that company from what is said to have been

a breach of the debenture trust deed involving River Murray
Broadcasting Pty Ltd.

I should deal also with the question of administration. I would view S. 440A(2) of the Corporations Law as being a specific provision relating to existing applications to wind up companies and therefore as operative, notwithstanding S. 440D of the Corporations Law. Under S. 440A(2), I would be obliged to adjourn the hearing of an application for an order to wind up a company only if I were satisfied of two things. One is that the company is under administration and the other is that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up.

I am by no means sure that the company is under administration. I view the provisions of S . 436A as being

strict. They provide that the company may by writing under	its common seal appoint an administrator if the board has
resolved to the effect that:  -

(a) in the opinion of the directors voting for the resolution the company is insolvent or is likely to become insolvent at some future time and,

I (b) an administrator of the company should be appointed.

In this case, after an abortive previous attempt, which failed because the directors had not even considered what their opinion was about solvency, two of the directors of this company met on 24th November 1993 at 7.35 pm. I point out that that was a matter of hours after I had pronounced my strong view that no administrator had been appointed validly

by a previous resolution.

The meeting was held with only two out of some seven directors present. Under the Articles of Association of the company, a quorum is two unless the directors have fixed some other number. There is no evidence that the directors have fixed another number. It must be borne in mind that S. 4 3 6 A requires that the board resolve, firstly, as to its opinion about solvency and, secondly, that an administrator be appointed. The resolution purports to be that of the two directors. It is followed at the foot of the page by the inscription, "We, the undersigned directors, were consulted about and hereby ratify the above resolution." There are

directors. hat accounts for six of the seven; there is no	some fax sheets with signatures beside the names of those four
evidence as to the views of the seventh.
I am not sure that a provision such as clause 4.6.10 of the Articles of Association can override the requirement of the Corporations Law that the board must resolve certain
r	things. In any event, clause 4.6.10 provides that a resolution in writing signed by all the directors for the time

being entitled to receive a notice of meeting of the directors shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held; any such resolution may consist of several documents in like form, each signed by one or more directors.

Two things spring to mind. One is the absence of

the seventh director and the requirement for signature by all the directors; the other is the inscription which suggests that the four directors who have signed view the resolution as having been passed already and themselves as ratifying it. I

am not sure that that satisfies the requirement that a

resolution in writing signed by the directors constitutes a
resolution of the board.

The other difficulty is that, in my view, S. 4 3 6 A requires clearly that the board form an opinion about the question of solvency. The directors must inform themselves about the position of the company and express their opinion

must say so; if it is about to become insolvent, then they	clearly. If the company is then and there insolvent, they
must say so and say when they believe it is likely that it will be insolvent.
Here the resolution simply is expressed in the alternative, in the words of para. (a) of subs. (1) of the section. It simply resolves that a person whose name and

r

address are given be appointed as the administrator of the

company "as, in the opinion of the Directors voting for the resolution, the -company is insolvent, or is likely to become insolvent at some future time and an administrator of the company should be appointed". I do not regard that as a sufficient exerclse of the responsibility imposed by S. 436A.

The remaining element of which I would need to be satisfied before adjourning the matter under S. 44OA(2) is that it would be in the interests of the company's creditors for the company to continue under administration rather than

be wound up. Having regard to my understanding of the

position that the company is in and to the lack of substance of the cross-claim, it seems to me that I can only reach the conclusion that it is not in the interests of the company's creditors for the company to continue under administration.

The company was a signatory to a promissory note,
which was among the various fo,?ns of security which the

applicant took in order to secure the payment of the balznce

of the purchase price for the shares in River Murray	Broadcasting Pty Ltd. The promissory note was one of several
which were designed to secure the payment of instalments. There was default on 14th April 1993 in respect of the payment of an instalment and a judgment was entered under the Instruments Act 1958 (Vic. ) for the amount of the promissory note. On any view, the company owed that instalment of the
I	purchase price and indeed several later instalments in respect of the purchase price of those shares. It did not pay that

instalment. It suffered judgment. It either made no attempt to set aside that judgment or its attempt to do so was defeated. The judgment remains unsatisfied. It is a judgment for a considerable amount.

The company's assets seem to consist largely of its shares in River Murray Broadcasting Pty Ltd and a debt said to be owing by River Murray Broadcasting Pty Ltd to the company. River Murray Broadcasting Pty Ltd is in the hands of a receiver. Its assets are part of the security for the purchase of the shares by the company the subject of this application, and it does not seem that those shares are likely to be worth much. The evidence is that there will be a shortfall on a realisation of the assets of River Murray Broadcasting Pty Ltd of some amount of approximately $325,000.

I am therefore of the view that the company should

be wound up. In matter VG number 3260 of 1993, the Court

orders that: 

1. Murray River FM Pty Ltd be wound up by this court under the provisions of the Corporations Law.

2.    Robert Michael Rennedy of Edwards Marshall, 4/8 Angas Street, Kent Town, South Australia, an official liquidator, be appointed the liquidator of the company.

3.   The applicant's costs, including reserved costs, be taxed and reimbursed out of the property of the company in accordance with S.

4 6 6 ( 2 ) of the Corporations Law.

Counsel for the applicant:	Mr. Donald
Solicitor for the applicant:	Gledhill Burridge & Cathro
Counsel for the respondent:	Mr. Young
Solicitor for the respondent:	N.A. Young & CO
Date of Hearing:	1st December 1993
Date of Judgment:	1st December 1993

I certify that this and the

preceding seven (7) pages are a true copy of the reasons for judgment of his Honour Justice G

Associate:

Date:  1 -LJ- -7 y