Lindeboom v ACEWAY Asset Pty Ltd (in Liq)
[1999] WASC 168
LINDEBOOM -v- ACEWAY ASSET PTY LTD (IN LIQ) [1999] WASC 168
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASC 168 | |
| Case No: | COR:216/1999 | 7 SEPTEMBER 1999 | |
| Coram: | MASTER SANDERSON | 14/09/99 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | JOHANNA ARNOLDA LINDEBOOM ACEWAY ASSET PTY LTD (IN LIQ) (ACN 078 945 977) |
Catchwords: | Corporations law Application for extension of time to lodge notice of change Winding up commenced No new point of principle |
Legislation: | Corporations Law, s 266(4) |
Case References: | Ashburton Estates Pty Ltd [1983] Ch 110 Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (In Liq) (1973) 131 CLR 605 Douglas-Brown v Standard Chartered Finance Ltd (1990) 8 ACLC 993 J J Leonard Properties Pty Ltd v Leonard (WA) Pty Ltd (No 2) (1988) 6 ACLC 247 Morris v Woodings (1997) 25 ACSR 636 Bloodstock Air Services of Australia Pty Ltd (In Liq) v Roadrunner Equipment Pty Ltd (1985) 3 ACLC 735 Campbell Finance v Vivstan Packaging (Aust) Pty Ltd (In Liq) (1996) 14 ACLC 1,686 Re Lloyd Anthony Furniture Pty Ltd (1996) 14 ACLC 540 Rynmarc Pty Ltd v Classic Ergonomic Chairs Pty Ltd (1994) 12 ACLC 1,038 Sanwa Australia Finance Limited v Ground Breakers Pty Ltd (In Liq) [1991] 2 Qd R 456 Re Sandawell Pty Ltd (In Liq) (1991) 4 ACSR 478 Re Wilson Tyres Pty Ltd (1992) 7 ACSR 318 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
ACEWAY ASSET PTY LTD (IN LIQ) (ACN 078 945 977)
Respondent
Catchwords:
Corporations law - Application for extension of time to lodge notice of change - Winding up commenced - No new point of principle
Legislation:
Corporations Law, s 266(4)
Result:
Application dismissed
(Page 2)
Representation:
Counsel:
Applicant : Mr K L Christensen
Respondent : Mr A Chai
Solicitors:
Applicant : Wilson & Atkinson
Respondent : Blake Dawson Waldron
Case(s) referred to in judgment(s):
Ashburton Estates Pty Ltd [1983] Ch 110
Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (In Liq) (1973) 131 CLR 605
Douglas-Brown v Standard Chartered Finance Ltd (1990) 8 ACLC 993
J J Leonard Properties Pty Ltd v Leonard (WA) Pty Ltd (No 2) (1988) 6 ACLC 247
Morris v Woodings (1997) 25 ACSR 636
Case(s) also cited:
Bloodstock Air Services of Australia Pty Ltd (In Liq) v Roadrunner Equipment Pty Ltd (1985) 3 ACLC 735
Campbell Finance v Vivstan Packaging (Aust) Pty Ltd (In Liq) (1996) 14 ACLC 1,686
Re Lloyd Anthony Furniture Pty Ltd (1996) 14 ACLC 540
Rynmarc Pty Ltd v Classic Ergonomic Chairs Pty Ltd (1994) 12 ACLC 1,038
Sanwa Australia Finance Limited v Ground Breakers Pty Ltd (In Liq) [1991] 2 Qd R 456
Re Sandawell Pty Ltd (In Liq) (1991) 4 ACSR 478
Re Wilson Tyres Pty Ltd (1992) 7 ACSR 318
(Page 3)
1 MASTER SANDERSON: This is an application for an extension of time to lodge a notice in respect of a charge over the assets of the respondent company. The application is supported by an affidavit of Stephen Lee Atkinson, sworn 28 July 1999. In opposition to the application the Liquidator of the respondent, Bruce James Carter, swore an affidavit dated 19 August 1999. There is no dispute in relation to the facts, which can be summarised in the following way.
2 In October 1997 Messrs Wilson & Atkinson, solicitors, received instructions from the applicant to prepare a charge over the assets of the respondent. The charge was to secure an advance made by the applicant to the respondent. On receipt of these instructions, Atkinson, a partner of the firm of solicitors, provided written instructions to one Jack Cullity a solicitor then employed by the firm to prepare the necessary documentation. This memo was dated 8 October 1997. Mr Cullity is now no longer working with Wilson & Atkinson and is resident out of the jurisdiction. He was not available to shed any light on matters as they transpired.
3 The file retained by Wilson & Atkinson indicates that Mr Cullity prepared the relevant loan and debenture documents in October 1997. They were then forwarded to the applicant for execution in early November 1997. At the same time he prepared the security documents, Mr Cullity prepared the necessary form for notification of details of a charge as required by s 263(1) of the Corporations Law. What happened to the security documents after they were prepared is not entirely clear. The documents themselves are dated 21 November 1997. They were lodged for stamping with the State Revenue Department and an assessment of duty issued on 5 February 1998. It is not clear from the file held by Wilson & Atkinson what date the security documents were returned by the applicant to their solicitors. All that can be said is that the 45 day period within which the notice of the charge was to be lodged was not complied with.
4 The fact that the notice of the charge had not been lodged was discovered by Wilson & Atkinson on 3 March 1999. The forms were lodged with the Australian Securities and Investment Commission on 4 March 1999. A certificate of charge was issued by ASIC on 12 March 1999. An application for winding up of the respondent was filed on 31 March 1999. The application was brought in the Supreme Court of South Australia. On 6 May 1999 Wilson & Atkinson wrote to Messrs Marshalls, solicitors for the petitioning creditor, drawing their attention to the charge. On 7 May 1999 Marshalls responded indicating
(Page 4)
- that a search had revealed the charge but not conceding its validity. On 8 June 1999 the Liquidator wrote to Wilson & Atkinson stating that he regarded the charges void because of the failure to register the charge within the relevant period under s 263 of the Corporations Law. This application for an extension of time to register the charge was brought on 28 July 1999.
5 This application is brought under s 266(4) of the Corporations Law. That section is in the following terms:
"The Court, if it is satisfied that the failure to lodge a notice in respect of a charge, or in respect of a variation in the terms of a charge, as required by any provision of this Division;
(a) was accidental or due to inadvertence or some other sufficient cause; or
(b) is not of a nature to prejudice the position of creditors or shareholders;
or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested on such terms and conditions as seem to the Court just and expedient, by order, extend the period for such further period as is specified in the order."
6 The approach to this section has been considered in any number of cases. In Morris v Woodings (1997) 25 ACSR 636 Wheeler J put the position as follows (at 638):
"It is clear that there is a discretion in relation to the extension of time pursuant to s 266(4). To lay down what purports to be a binding rule to be applied in each case, would be to turn what is a broad discretion into an impermissibly fettered one. However, having regard to the nature of the discretion and the time at which it comes to be exercised, as well as the statutory scheme in which it appears, which is concerned with the protection of those who deal with companies by, inter alia, the provision of adequate notice of charges, certain principles of general application must follow. First, it is a deeply rooted principle of company law that when liquidation is commenced, one creditor should not be assisted by the court to improve its position vis-a-vis other creditors. It follows from that, that while a discretion always remains, an extension of time will almost
(Page 5)
- invariably be refused after the commencement of a winding up unless there be exceptional circumstances."
7 Her Honour then referred to the Western Australian cases of J J Leonard Properties Pty Ltd v Leonard (WA) Pty Ltd (No 2) (1988) 6 ACLC 247 and Douglas-Brown v Standard Chartered Finance Ltd (1990) 8 ACLC 993.
8 It may seem, at first pass, that her Honour's reference to the time for registration only being extended in exceptional circumstances once a winding up has commenced, provides an unnecessary gloss on the discretion conferred by statute. However, there is no doubt that her Honour's statement of principle is soundly rooted in authority. In Ashburton Estates Pty Ltd [1983] Ch 110 Lord Brightman put the position as follows (at 123):
"Once the company has gone into liquidation, the existing unsecured creditors are interested in all the assets of the company, since the Liquidator is bound by statute to distribute the net proceeds pari passu among the unsecured creditors, subject to preferential debts. The assets of the company are at that stage vested in the company for the benefit of its creditors. The unsecured creditors are in the nature of cestuis que trust with beneficial interests extending to the company's property."
9 This case is cited with approval both by Burt CJ in the J J Leonard Properties Pty Ltd decision (supra) (at 250) and by Malcolm CJ and Rowland J in the Douglas-Brown decision (supra) (at 997). In the J J Leonard Properties Pty Ltd decision Burt CJ also refers to what was said by Menzies J in Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (In Liq) (1973) 131 CLR 605 at 613:
"It is a deeply rooted principle of company law that, when liquidation has commenced, one creditor should not be assisted by the court to improve its position vis-a-vis other creditors."
10 The rationale for this approach and its repeated application throughout Australia is detailed by Malcolm CJ and Rowland J in their joint judgment in the Douglas-Brown decision. This decision, and others referred to therein, make it plain that the lodgment of a notice prior to the commencement of winding up is an important factor which is to be taken into account when exercising discretion. The Douglas-Brown decision also makes it plain that the fact that the notice was lodged before the application to wind up was filed and that the petitioning creditor was
(Page 6)
- aware of the existence of the charge are matters to be taken into account in considering the application.
11 The present position as regards funds available for distribution to creditors is set out by Carter in his affidavit. In summary, he says that after payment of his costs and other expenses he will have approximately $10,000 to distribute to creditors. That estimate does not take into account the costs of the present proceedings. The claim of the employee priority creditors is approximately $10,000. This includes a claim of $2,500 by a former director of the respondent who is the son of the applicant. The other unsecured creditors have claims of approximately $30,000 in total. The applicant's claim is for $18,026. It would appear then that if time is not extended for lodging of notice with respect to the charge the priority creditors will be paid and no other creditors, including the applicant, will receive anything. The Liquidator hints at the prospect of recoveries either by way of preferences or actions taken under Pt 5.7B of the Corporations Law - that is to say, actions for recovery of property or compensation taken for the benefit of creditors. Quite what action might be taken and against whom and what amount this might yield is not specified. Of course, if time is extended then the applicant will receive all available funds and the creditors of the respondent, including the priority creditors, will receive nothing.
12 In support of the application counsel for the applicant referred to 12 separate matters which he said amounted to factors which, taken together, were special circumstances justifying the grant of an extension of time to lodge notice of the charge. The 12 matters counsel referred to can be set out as follows:
"1. Monies were advanced and used for the Company's purposes thus, a benefit to creditors. The debt is now $18,026.00.
2. There is no suggestion that the Company was insolvent when the charge was granted.
3. There is no suggestion that the charge was not registered except by reason of inadvertence or error.
4. There is no suggestion that the charge was registered for any reason except upon detection of the error.
5. Notice was lodged prior to the winding up (some 2 months).
(Page 7)
- 6. The application has been brought promptly.
7. The Petitioning Creditor had notice of the charge.
8. On the evidence only $8,637.08 was incurred outside the time the charge was registered.
9. Any recovery under Part 5.7B of the Corporations Law will not come within the ambit of the charge in any event.
10. The Liquidator has acted as if there was a defeasible title except one instance namely, the payment of petitioning creditor's costs.
11. The application is an irrelevancy to unsecured creditors who may or may not obtain a dividend. The fate of the application has no direct bearing upon them.
12. Although accepted that the application will affect priority creditors (eg wages) these persons will still obtain a dividend and this could be supplemented by any recoveries under part 5.7B of the Corporations Law without any interference from the Applicant."
13 Insofar as these circumstances relate to matters of fact, there was no contest by the respondent. The respondent's position was that this was simply a case of delay on the part of the applicant or the applicant's solicitors and that no special circumstances existed to justify an extension of time being granted. In my view that submission could never, on its own, be grounds for refusing an application. After all s 266(4)(a) specifically anticipates that failure to lodge the notice might be "accidental or due to inadvertence". While the evidence here is not entirely clear, it seems to me that inadvertence is the only reasonable explanation for what has occurred. There is certainly no suggestion that the applicant was attempting to achieve some commercial advantage by not lodging the necessary notice.
14 However, taking all matters into account, I am not satisfied that this is a case where the matters referred to by the applicant are sufficient to justify an extension of time being granted. The position may well be different had liquidation of the respondent not commenced. Bearing in mind the special position of creditors of the respondent in relation to the assets available on liquidation of the company, the matters raised by the
(Page 8)
- applicant do not justify a grant of leave. I am not satisfied that it would be just and equitable in all the circumstances to grant the application.
15 I would dismiss the application. The respondent ought pay the applicant's costs including any reserved costs.
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