Melbourne Co-Operative Book Shop Limited
[2015] VSC 69
•6 March 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2013 5098
| IN THE MATTER of MELBOURNE CO-OPERATIVE BOOK SHOP LIMITED ABN 49 377 238 672 (IN LIQUIDATION) | |
| BETWEEN | |
| MELBOURNE CO-OPERATIVE BOOK SHOP LIMITED ABN 49 377 238 672 (IN LIQUIDATION) | Plaintiff |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 February 2015 |
DATE OF JUDGMENT: | 6 March 2015 |
CASE MAY BE CITED AS: | Melbourne Co-Operative Book Shop Limited |
MEDIUM NEUTRAL CITATION: | [2015] VSC 69 |
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LIQUIDATION – Approval of liquidator’s remuneration and expenses – Corporations Act 2001 (Cth) s 473(3)(b)(ii).
LIQUIDATION – Surplus of funds available for distribution – Rules fail to provide for distribution of surplus as required by the Co-Operatives Act 1996 (Vic) – Surplus funds distributed to RMIT University for the purpose of providing scholarships – Power of the Court under Corporations Act 2001 (Cth) ss 479(3), 488.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Gronow | Piper Alderman |
HIS HONOUR:
Introduction
On 11 October 2013, Melbourne Co-operative Book Shop Limited (‘RMIT Bookshop’) was wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (‘the Corporations Act’) and s 314(2) of the Co-Operatives Act 1996.[1] Robyn Lee Erskine of Brook Bird Chartered Accountants was appointed liquidator (‘the Liquidator’).
[1]The Co-Operatives Act 1996, which applied at the time of the winding up of the plaintiff, has been repealed and replaced by the Co-Operatives National Law Application Act 2013 (Vic) (‘New Act’). Sections 442 and 444 of the New Act have the same effect as s 314 of the Co-Operatives Act 1996.
Unlike most liquidations, all creditors have been paid and there is a surplus of over $280,000 (excluding the Liquidator’s past and future costs of about $46,000) available for distribution.
RMIT Bookshop is and was for many years a bookshop operating in the nature of a co-operative. Members paid a low fee and were entitled to purchase books at a low or discounted price. Over the years membership grew to about 40,000 members. Given the number of members, it is not practical, desirable or possible to distribute the net surplus to them.
In addition to an order in relation to her costs, the Liquidator seeks a direction that she be permitted to pay the net surplus to RMIT University ‘for the purposes of providing scholarships for and otherwise assisting disadvantaged students to study at RMIT University’.
The application was heard on 25 February 2015 and the requested orders were made. I indicated that reasons would be provided. These are the reasons.
Approval of past and future remuneration and expenses
Section 473(3)(b)(ii) of the Corporations Act applies to a liquidator’s remuneration and expenses in circumstances where no committee of inspection has been appointed and there will not be any creditors’ meeting. Since there are no unpaid creditors of RMIT Bookshop and there is no committee of inspection, the section applies and court approval is required.
In her affidavit of 17 February 2015, the Liquidator addresses the factors set out in s 473(10) of the Corporations Act, deposing that:
(a) the work she has performed was all reasonably necessary;
(b) the work she anticipates performing between now and the conclusion of the liquidation is likely to be reasonably necessary;
(c) the period during which the work has been and is proposed to be performed by the Liquidator is not unreasonable;
(d) the Liquidator appears to have conducted the work competently, and dealt with a potentially complex liquidation expeditiously, efficiently, sensibly and economically;
(e) the work has been complex due to the large number of members and creditors of RMIT Bookshop and the need to manage the liquidation in a cost effective and efficient manner;
(f) the Liquidator has had to deal with extraordinary issues such as:
(i) the application of the Co-Operatives Act1996 to the liquidation;
(ii) the unusual structure of the co-operative having a very large number of members (over 40,000);
(iii) its lengthy period of operation since the early 1960s; and
(iv)the need to ascertain and pay in full all creditors;
(g) the Liquidator does not say that she has accepted or is likely to be required to accept a higher level of risk or responsibility than is usually the case;
(h) the value of the property of RMIT Bookshop, while not insignificant, is relatively modest, but this is reflected appropriately in the efficient and cost-effective way in which the Liquidator has managed the liquidation, including ascertaining creditors, dealing with the Australian Taxation Office (‘ATO’) and adopting an efficient method of dealing with the interests of the members of the co-operative;
(i) the Liquidator has not had to deal with any receivers or receivers and managers;
(j) the RMIT Bookshop had, for its size, a relatively large number of creditors including former employees and the ATO which have added some complexity, though the Liquidator does not contend that the number of creditors was unusually or onerously high nor does she contend that anything about the attributes or behaviour of the creditors has been unusual or required substantial extra work by her; and
(k) the Liquidator’s time has been carefully recorded in exhibit ‘RLE-3’ to her affidavit of 13 February 2015 and appears to have been properly taken and likely to be properly taken by her and does not appear to be of an excessive overall amount.
In these circumstances I am satisfied that the Court should exercise its discretion under s 473(3)(b)(ii) of the Corporations Act and approve the Liquidator’s remuneration and expenses (both past and to be incurred) in the amounts proposed. The amounts are reasonable and an order will be made accordingly.
Distribution of surplus
The large, diverse and uncontactable membership of RMIT Bookshop make it impractical, pointless and almost impossible to distribute the net surplus to them. The costs of locating and making contact with each member would probably exceed the net surplus available for distribution.
Further, it would be inappropriate to distribute the surplus to the 53 members out of 40,000 who have, following the necessary advertising, made claims and whose claims the Liquidator has accepted. To do so would mean those members would receive an unjustified windfall gain while the vast majority of the members would receive nothing.
Under s 488 of the Corporations Act and regulation 5.6.71 of the Corporations Regulations 2001 (Cth),[2] Court approval is required before distributing a surplus to members. In the present case (if such leave was sought) it would be entirely appropriate to refuse leave to distribute the surplus to members and instead make the direction sought, namely that the surplus funds left over after paying the Liquidator’s fees and expenses be paid to RMIT University for the purposes of providing scholarships for and otherwise assisting financially disadvantaged students to study at RMIT University.
[2]Applicable in the circumstances pursuant to the Co-Operatives Act 1996 s 316.
There is authority dealing with the exclusion of certain members or contributories where appropriate. In Lion Energy Limited v Tulloch Lodge limited (in liqin the matter of Tulloch Lodge Limited (in liq),[3] White J of the Federal Court of Australia approved, under s 488 of the Corporations Act, the distribution of a surplus to contributories that excluded those who would receive less than $25. In the case before me it is intended to exclude all members for the reasons advanced.[4] The reasons are cogent and I would not have approved an application to distribute the surplus to all 40,000 members.
[3][2014] FCA 259; (2014) 32 ACLC 14-011.
[4]It is interesting and not without relevance to note that even if all members were known they would only receive about $5.85 each (net surplus after Liquidator’s costs of about $234,000 ÷ 40,000).
Pursuant to s 319(2) of the Co-Operatives Act 1996,[5] the rules of RMIT Bookshop were required to make provision for the distribution of any surplus remaining upon the winding up of the co-operative.
[5]As noted above (n1), the Co-Operatives Act 1996 has been repealed and replaced by the New Act. However, pursuant to s 34 of the New Act the previous provisions continue to apply with regard to entitlements relating to a surplus arising from the business of a co-operative and held immediately before the commencement of New Act. (It is also of note that in any event, the new Act contains s 448 which is equivalent to the Co-operatives Act 1996 s 319.)
Regrettably, the rules of the present co-operative do not make any express provision in terms required by s 319 of the Co-operatives Act 1996. However, rule 56 provides as follows:
56. Co-Operative Funds
(1)The board may resolve to retain all or any part of the surplus arising in any year from the business of the co-operative to be applied to the benefit of the co-operative.
(2)A part of the surplus arising in any year from the business of the co-operative may be applied for one or both of the following -
(a)in payment not exceeding 10% to any charitable purpose specifically designed for the students of RMIT University; or
(b)up to 10% for supporting any activity approved by the co-operative.
As set out in the affidavit of Dr Ian Fraser (‘Dr Fraser’) (who was chairman of the plaintiff at the time of the appointment of the Liquidator) sworn on 10 December 2014, the surplus held by the Liquidator is effectively the result of retained profits of RMIT Bookshop, which were contributed by RMIT students purchasing books and other items over several years. It would accordingly be appropriate for the surplus to be used in accordance with rule 56(2)(a) for a ‘charitable’ purpose for the benefit of the students of RMIT.
Providing ‘scholarships and other assistance to help disadvantaged students study at RMIT’ is such a charitable purpose, because it would be for the advancement of education, and also for the relief of poverty and infirmity (to the extent that the students assisted were disadvantaged due to those causes).
It is apparent from the evidence of Melissa Smith, Director, Advancement, RMIT University, that RMIT University has the relevant tax deductable status for donations made to it for purposes of that nature. In addition RMIT University has indicated that it will match the amount dollar for dollar.
Further, the Liquidator deposes to a conversation with Dr Fraser in which he indicated that he had spoken to other previous Board members and that it is their wish that the surplus funds be dealt with as proposed. This is confirmed by Dr Fraser in his evidence.
In my opinion the Court has power under s 479(3) of the Corporations Act to make the direction sought. The power is a broad power and complementary to s 488.[6] The proposed directions will self-evidently be of advantage in the liquidation and it is entirely just and beneficial to make the direction sought.
[6]Aboriginal Co-operative Limited (in liq); an application by Wallace-Smith [2002] VSC 9. See also Mischel v Mischel Holdings Pty Ltd (in liq) (No 2) [2012] VSC 421.
Conclusion
For these reasons, it is appropriate for the Court to give a direction to the Liquidator that rather than distribute the surplus funds in the liquidation to members, she should pay it to the RMIT University Advancement Office for the purposes of providing scholarships and other assistance for disadvantaged students to study at RMIT University.
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