Re Agri-Food Training Centre Pty Ltd - [2002] WASC 180

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RE AGRI-FOOD TRAINING CENTRE PTY LTD; EX PARTE LEYSLEY [2002] WASC 180

CORAM: ROBERTS-SMITH J

HEARD: 26 JUNE 2002

DELIVERED : 26 JUNE 2002

FILE NO/S: COR 191 of 2002
EX PARTE
TJALA CHRISTINE FRANCES LEYSLEY
Applicant

Catchwords:

Corporations Law - Application for appointment of a provisional liquidator - Turns on its own facts

Legislation:

Corporations Law, s 472

Result:

Provisional Liquidator appointed

Category: B

Representation:

Counsel:

Applicant: Mr T H Brickhill
Agri-Food Training Centre Pty Ltd : No appearance

Solicitors:

Applicant: Brickhills
Agri-Food Training Centre Pty Ltd : No appearance

Case(s) referred to in judgment(s):

Australian Securities Commission v Solomon & Ors (1996) 19 ACSR 73
Re J N Taylor Holdings Pty Ltd, Zempilas v J N Taylor Holdings Ltd (No 3) (1990) 3 ACSR 620
Re McLennan Holdings Pty Ltd (1983) 7 ACLR 732

Case(s) also cited:

Nil

ROBERTS-SMITH J: This is an application dated 25 June 2002 for the appointment of a provisional liquidator to Agri‑Food Training Centre Pty Ltd, the defendant in this matter. It is supported by an affidavit of Tjala Christine Frances Leysley dated 24 June 2002 and there is an application by way of originating process for a winding‑up order dated 25 June 2002. The winding‑up order seeks an order that the defendant be wound up on the ground of insolvency and there is an affidavit again by the same‑named deponent in support of that application.
The matter comes on with some degree of urgency and as to that there is a certificate on file dated 25 June 2002 certifying to those matters required by the practice direction to be certified to. There is a consent of liquidator dated 24 June by which Jennifer Elizabeth Low, an official liquidator, consents to be appointed and stating that she is not aware of any conflict of interest or duty that would make it improper for her to act as liquidator of the company. There is a similar consent in relation to appointment as provisional liquidator.
It appears from the affidavit material before me and specifically the affidavit of Ms Leysley in support of the appointment of a provisional liquidator, that the defendant was incorporated in this state under the Corporations Law on 7 June 2001. Ms Leysley is an employee of the defendant company and a creditor of it. She is the bookkeeper of the company and has been since 11 June 2001. She states that she is currently owed the sum of $3,116 gross wages by the company for her services during the period of June 2002.
The company provides Quality Assurance training systems for farmers. It is said that the program provided by the company is unique and is the only one of its type in Australia. It enables farmers to be approved as a quality assured bulk product provider by the regulatory body, Safe Quality Food International. The affidavit discloses that the company is continuing to receive payments from farmer customers in relation to forthcoming training programs facilitated by the company. The next such training program is anticipated to be on 8 July 2002.
I have mentioned the application for an order that the company be wound up on the ground of insolvency. The circumstances are, as Mr Brickhill who appears for the applicant submits, very sad. The applicant is a very close friend of the company's sole director, Christine Ruth Kershaw, having known her for approximately 5 years and with whom she has been residing for about 12 months at the business premises of the company, 205 Falls Road, Lesmurdie.
The position apparently is that Ms Kershaw suffers from a psychiatric illness known as bipolar disorder. Ms Leysley is extremely concerned and worried about Ms Kershaw's wellbeing. She deposes that about Wednesday, 19 June 2002, she had a discussion with Ms Kershaw who told her that she thought the company was insolvent and agreed with Ms Kershaw that she would meet with an accountant to appoint an administrator of the company on 21 June 2002. Unfortunately, Ms Kershaw did not attend the meeting and has been admitted to Fremantle Hospital on 22 June where she is now under observation following an attempt to take her own life.
Ms Leysley deposes that the company is insolvent and that is supported by exhibit TCFL1, a document which sets out the estimated current financial position of the company as at 20 June 2002 which shows net liabilities in excess of $176,000. The company currently has eight employees and as I have indicated, is continuing to receive payments from its customers.
Ms Leysley deposes that due to Ms Kershaw being away from the company and being the sole director and shareholder of it, there is no‑one to manage the company's affairs. The company has no guidance or direction and Ms Kershaw in her current condition has no apparent ability to manage the company's affairs.
It seems from Ms Leysley's affidavit that approximately two weeks ago Ms Kershaw requested a Mr Michael Chappell and Mr John Horley to oversee the affairs of the company as she needed to take a leave of absence due to her mental illness.
Ms Leysley states that during that period of time she was aware that Mr Chappell and Mr Horley analysed the company's financial situation and they have confirmed Ms Kershaw's admission to her on 19 June 2002; that is, that the company was insolvent.
The appointment of a provisional liquidator is sought to protect the company's assets; namely, to collect moneys received from participants in future programs of the company, to deal in an orderly way with the company's employees, to manage the affairs of the company pending the hearing of the winding‑up application and to preserve and hopefully maintain the major asset of the company, which is its written manuals, work books and intellectual property pertaining to the Quality Assurance Program.
Section 472 of the Corporations Law makes it clear that on an application of this kind, the Court has essentially an unfettered discretion.
I note that in the present case the perceived insolvency of the company is not the sole ground for seeking the appointment of a provisional liquidator. That I think is an important consideration. Prerequisites to the appointment of a provisional liquidator include the existence of a valid and duly authorised winding‑up application in respect of it and a reasonable prospect of that application having success (see Re J N Taylor Holdings Pty Ltd, Zempilas v J N Taylor Holdings Ltd (No 3) (1990) 3 ACSR 620), Re McLennan Holdings Pty Ltd (1983) 7 ACLR 732, and Australian Securities Commission v Solomon & Ors (1996) 19 ACSR 73).
The test to be applied, as I understand it, is similar to that applicable to interlocutory injunctions but here consists of two fundamental questions; first, whether there is a serious question to be tried and, secondly, where does the balance of convenience lie.
It seems to me on the material that there is clearly a prima facie case that the company is insolvent, and indeed that in the interim there is a need for the appointment of some person to control and manage the affairs of the company.
This is clearly not a case in which there are other directors or other persons on hand with the capacity and authority to assist or take over the running of the company's affairs while the sole shareholder and director is incapacitated. As Mr Brickhill says, it is a most sad situation.
Although it has been held that the main purpose of a provisional liquidator is to preserve the status quo pending the hearing of the winding‑up application (see Re J.N. Taylor Holdings Ltd) to which I have already referred, I am inclined to accept the view, which I think has been expressed by Master Sanderson in this Court on a number of occasions, that the 1992 amendments to the Corporations Law which extended the powers of provisional liquidators to encompass duties which actively promote the company continuing as a going concern create a greater role for a provisional liquidator than perhaps has been seen hitherto. That observation, I think, is probably apposite in the circumstances of this application.
The application has been made on an urgent basis ex parte. It seems to me in the circumstances that that was appropriate. I propose to grant the order sought and I will make orders in terms of the minute dated 26 June 2002.