Porter v Chief Commissioner of State Revenue

[2003] NSWSC 243

Reported Decision: (2003) 44 ASCR 725

Supreme Court

CITATION:	Porter v Chief Commissioner of State Revenue [2003] NSWSC 243
HEARING DATE(S):	25/03/03
JUDGMENT DATE:	25 March 2003
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Young CJ in Eq
DECISION:	Orders made.
CATCHWORDS:	CORPORATIONS [177]- Voluntary administration- Liquidator becoming administrator- Company able to pay 100 cents in dollar- Procedure.
LEGISLATION CITED:	Corporations Act 2001, ss 436B, 510
PARTIES :	Richard James Porter (Applicant) Chief Commissioner of State Revenue (Respondent)
FILE NUMBER(S):	SC 1536/03
COUNSEL:	A Iuliano (Applicant)
SOLICITORS:	Champion Legal (Applicant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

YOUNG CJ in EQ

Thursday 25 March 2003

1536/03 – PORTER v CHIEF COMMISSIONER OF STATE REVENUE

JUDGMENT

1 HIS HONOUR: This is a very sensible application made by the liquidator of a company which has considerable assets but little liquid funds. It would seem that the company went into liquidation because it did not pay a relatively small debt to the respondent. The controlling director of the company said had the winding up process come to his attention (it was evidently served on a registered office which was not then currently in communication with that director) he just would have paid the debt.

2 However, when the company went into liquidation the liquidator determined that, whilst it was unable to pay its debts out of current resources, by the proper realisation of its assets there would be quite a significant surplus. The liquidator and the director have been talking and co-operating, there have been creditors' meetings and it now appears quite clear that the sensible course is for the assets to be realised, otherwise than on a fire sale basis, for all the creditors to be paid one hundred cents to the dollar and the surplus, after the costs of liquidation/administration, returned to the shareholders, or to the company to continue trading. To do that the company needs to move out of liquidation mode and for a deed of arrangement to be entered into.

3 Section 436B of the Corporations Act 2001 provides that the liquidator may appoint an administrator, if he or she thinks that the company is insolvent, or is likely to become insolvent at some future time, and with the leave of the court the liquidator may appoint himself or herself. These proceedings are then brought so that the liquidator can be appointed an administrator and the various meetings can take place with a view to a deed of arrangement.

4 The problem is that at the moment there is no evidence that the liquidator thinks that the company is insolvent. It was insolvent under the recognised test as at the date of liquidation, but there has now been some movement down the track in the realisation of assets, and the company may now not be insolvent: it might be able to pay its debts within a reasonable time out of readily realisable resources.

5 It seems to me that in order for the court to make an order under s 436B there must be evidence from the liquidator as to what his or her thoughts are, that is, that on the material before him, which he or she should refer to, he or she has formed the opinion referred to in s 436B(i).

6 In the present case, I will make the order, subject to that affidavit being filed. As I say, it is a very sensible arrangement that the liquidator has in mind.

7 If there were no evidence that the liquidator thought that the company was insolvent, the aim could still be achieved, but it would be necessary to go by way of scheme of arrangement, vide s 510 of the Corporations Act, making the appropriate orders to stay the winding up on conditions in the meantime.

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Last Modified: 04/02/2003