Re Atari Enterprises Pty Ltd (in Liq)
[2024] WASC 141
•23 APRIL 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE ATARI ENTERPRISES PTY LTD (IN LIQ); EX PARTE CARRELLO [2024] WASC 141
CORAM: MASTER RUSSELL
HEARD: 18 APRIL 2024
DELIVERED : 18 APRIL 2024
PUBLISHED : 23 APRIL 2024
FILE NO/S: COR 52 of 2024
MATTER: IN THE MATTER OF ATARI ENTERPRISES PTY LTD (IN LIQUIDATION) (ACN 622 497 643)
EX PARTE
GIOVANNI MAURIZIO CARRELLO as liquidator of ATARI ENTERPRISES PTY LTD
Plaintiff
Catchwords:
Corporations law - Application by plaintiff liquidator for order nunc pro tunc approving entry in a deed of assignment under s 477(2B) of the Corporations Act 2001 (Cth) - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 477(2B)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | L Christensen |
Solicitors:
| Plaintiff | : | CX Law |
Case(s) referred to in decision(s):
Kitay v Frigger [No 2] [2024] WASC 113
Re Great Southern Managers Australia Ltd (in liq); Ex Parte Jones, Weaver and Stewart (in their capacity as liquidators of Great Southern Managers Australia Ltd (in liq)) [2014] WASC 312
Re Red Lancer Pty Ltd (in liq); Ex parte Bumbak [2019] WASC 450
MASTER RUSSELL:
(These reasons were delivered orally at the conclusion of the hearing. They have been edited to correct matters of grammar and infelicity of expression. Authorities and other references have also been footnoted rather than appearing in the body of the reasons.)
Introduction
The plaintiff, the liquidator of Atari Enterprises Pty Ltd (In Liquidation) (ACN 622 497 643) (Company), applies ex parte for an order pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Act) that the court approve nunc pro tunc entry into a deed of assignment between the Company and Can't Escape Karma Pty Ltd (ACN 675 973 449) (Application).
The Application is supported by affidavits of the plaintiff, Giovanni Maurizio Carrello, sworn and filed on 4 and 17 April 2024.
Background
The following background is derived from the affidavits of Mr Carrello, which is summarised in the outline of submissions filed by the plaintiff on 15 April 2024.
The plaintiff was appointed the voluntary administrator of the Company on 1 November 2023 and appointed liquidator by resolution of creditors on 4 December 2023, when the meeting of creditors resolved to place the Company in liquidation.[1]
[1] Plaintiff's Submissions [1]; Affidavit of Giovanni Maurizio Carrello sworn 2 April 2024 [5], [9] (First Carrello Affidavit).
Until 18 December 2023, the Company was the holding company for a subsidiary, Atari Enterprises Trading Company Pty Ltd (ACN 624 554 025) (Trading Company). The Company did not trade, other than retaining title to some assets, and provided funding to the Trading Company for its working capital and for the purposes of constructing a new brewery and hospitality venue.[2]
[2] First Carrello Affidavit [15].
The Trading Company's primary activity is the brewing of alcoholic beverages for sale and wholesale production.[3]
[3] First Carrello Affidavit [16].
On 22 August 2023, Aaron Joseph Dominish, Cameron Hugh Shaw and Richard Albarran were appointed the joint and several administrators of Trading Company, in accordance with s 436A of the Act (Trading Company Administrators).[4]
[4] First Carrello Affidavit [22].
On 9 November 2023, the creditors of the Trading Company resolved at the second meeting of creditors that the Company enter a deed of company arrangement.[5]
[5] First Carrello Affidavit [23].
On 10 November 2023, the Trading Company Administrators and Run With Us Pty Ltd (ACN 671 738 391), the Trading Company's sole shareholder, entered into a deed of company arrangement which effectuated on 18 December 2023.[6]
[6] First Carrello Affidavit [20], [24] ‑ [25], JC9.
The plaintiff deposes that the Company does not have any assets and has liabilities totalling $3,320,584. He is of the opinion that, currently, neither priority creditors nor unsecured creditors are expected to receive any dividend in the winding of the Company.[7]
[7] First Carrello Affidavit [27] ‑[28].
By document dated 28 March 2024, the Company and the plaintiff entered into a deed of assignment with Can't Escape Karma Pty Ltd (ACN 675 973 449) as the assignee (Assignment Deed). The assignee is otherwise a stranger to the affairs of the Company but has some connections to the Company's creditors.[8]
[8] Plaintiff's Submissions [7]; First Carrello Affidavit [14], [19], [31].
The effect of the Assignment Deed, as deposed to by the plaintiff and on the evidence, is that:
(a)the assignee will pay the purchase price of $20,000 to the Company within three business days of the satisfaction of the conditions precedent to the Assignment Deed;[9]
(b)the Company will be entitled to distributions on a parri passu basis from 10% of the net monetary amount recovered by the assignee in excess of $50,000;[10]
(c)the assignors will be reimbursed by the assignee of their costs associated with satisfying the conditions precedent to the Assignment Deed;[11] and
(d)the Company will not bear any risks associated with the recovery actions in relation to the claims assigned, which will solely be borne by the assignee.
[9] First Carrello Affidavit, JC12, cl 4.1.
[10] First Carrello Affidavit, JC12, cl 4.12.
[11] First Carrello Affidavit, JC12, cll 2.5 and 2.6.
Counsel for the plaintiff outlined in some further detail the background to, and the arrangement under, the Assignment Deed.
The approval of the court is a condition precedent of the Assignment Deed because the obligations arising under the deed will continue for longer than three months.[12]
[12] Plaintiff's Submissions [4]; First Carrello Affidavit, JC12, cl 2.
The plaintiff describes the Assignment Deed's proposed assignment and terms as reasonable, commercial and competitive. His assessment is that entering into the Assignment Deed is in the best interests of the Company and its creditors.[13]
[13] First Carrello Affidavit [23].
The plaintiff deposes that, from his investigations, his preliminary view is that there are potential claims for insolvent trading and breaches of director's duties by Scott Robert William Douglas, the sole director and secretary of the Company and Trading Company, and which are more fully particularised in his report to creditors.[14] The Assignment Deed will allow any such claims to be pursued, which the Liquidator is unable to fund.[15]
[14] First Carrello Affidavit [13], [10], [18], [26], JC6.
[15] Plaintiff's Submissions [6], [9]; First Carrello Affidavit [34].
The plaintiff's further affidavit sworn on 17 April 2024 (Second Carrello Affidavit), attaches a notice to creditors which was sent on 16 April 2024. The notice informs the creditors of the potential claims and breaches referred to. It also provides notice that Mr Carrello proposes to assign all choses in action in relation to the Company and its external administration capable of being assigned to Can't Escape Karma Pty Ltd, an associated entity of a creditor of the Company for consideration under the Deed of Assignment. The notice does not attach the Assignment Deed but provides a summary of the Assignment Deed, as it is subject to confidentiality.
Legal principles
Section 477(2B) of the Act prevents liquidators from entering into, without the approval of the court, of the committee of inspection or a resolution of the creditors, an agreement on a company's behalf if the term of the agreement may end, or the obligations of a party to the agreement may be discharged more than three months after the entering into of the agreement, even if the obligations under the agreement may be discharged within the three-month period.
Section 477(2B) of the Act enables the court to ensure that the winding up of a company is not delayed by a liquidator entering into long term agreements. This is why approval is required if the term of the agreement may end or the obligations of a party may be discharged by performance more than three months after the agreement is entered into.
In Re Red Lancer Pty Ltd (in liq),[16] Vaughan J, as his Honour then was, summarised the relevant authorities and principles applicable to an application under s 477(2B), which I refer to without repeating.
[16] Re Red Lancer Pty Ltd (in liq); Ex parte Bumbak [2019] WASC 450 [48] ‑ [49], referring to Re Great Southern Managers Australia Ltd (in liq); Ex Parte Jones, Weaver and Stewart (in their capacity as liquidators of Great Southern Managers Australia Ltd (in liq)) [2014] WASC 312 [76] ‑ [77]. See also Kitay v Frigger [No 2] [2024] WASC 113 [142].
I have applied these principles in my consideration and determination of this Application.
It is well established that the court has power to grant approval nunc pro tunc (retrospectively) under s 477(2B) of the Act, but it must carefully guard against the potential for retrospective approvals to be used, wittingly or unwittingly, to circumvent the statutory purpose.[17]
[17] Kitay v Frigger [No 2] [2024] WASC 113 [144].
Disposition
I am satisfied on the evidence read in support of the application that the plaintiff's commercial judgment, with his knowledge of the Company and its liquidation, entering into the Assignment Deed is in the best interests of the Company and its creditors. Doing so allows the assignee to provide funds for, and assume the risk of, investigating potential claims the Company may have against Mr Douglas. The strength of those claims and the likelihood of recovery are presently unclear. This is partly because the Company does not have the resources to properly investigate them. Nor does it have resources to pursue them. Depending on the success of any recovery, there may be a benefit for the creditors or otherwise funds available to the plaintiff, as liquidator.
I have no reason to doubt that the plaintiff's entry into the Assignment Deed is in good faith and that he entered into it having exercised commercial judgment, with his knowledge of the circumstances of the winding up of the Company.
From his investigations, the plaintiff believes there may be causes of action that could lead to some recovery. Though, as I have said, the prospects are as yet unclear due to lack of resources to properly investigate them. The assignees under the Assignment Deed will take the risk to undertake further investigations and prosecute proceedings to seek recovery of the assets and disclosure of potentially improper behaviours in relation to the conduct of the Company's affairs. The assignee is also meeting the costs of the Application.
Though it is possible that entering into the Assignment Deed could delay the liquidation, I am satisfied that, in the circumstances, such a delay would be reasonable and in the interests of the winding up of the Company. If the liquidator were in funds and could take the proceedings or investigate the claims himself, then the time taken is unlikely to be very much different. There does not appear to be a reason to intervene to protect the expeditious and beneficial administration of the winding up.
I am satisfied the plaintiff has made out his case for nunc pro tunc approval to enter into the Assignment Deed under s 477(2B) of the Act.
The creditors have had limited notice, though would not necessarily or ordinarily receive notice of the Application. Having had notice of the Application, none have sought to appear or inform the court they wish to be heard. Though I note, notice was only given on 17 April 2024. The plaintiff's proposed orders, as varied during the hearing, include that there should be liberty to apply to any party claiming to be aggrieved by the making of an order under s 477(2B) of the Act to apply to vacate to vary the orders. Such order should be made.
Conclusion and orders
For these reasons, I am satisfied it is appropriate to grant the relief sought and I will make the following orders:
1.Pursuant to section 477(2B) of the Corporations Act 2001 (Cth), the Plaintiff has approval nunc pro tunc as and from 28 March 2024 to enter into and to cause Atari Enterprises Pty Ltd (In Liquidation) (ACN 622 497 643) (Company) to enter into the Deed of Assignment with Can't Escape Karma Pty Ltd (ACN 675 973 449) in the form of the deed marked as 'JC12' and attached to the affidavit of Giovanni Maurizio Carrello sworn on 4 April 2024.
2.There be liberty to any party claiming to be aggrieved by the making of these orders to apply to vacate or vary the orders.
3.The Application is otherwise adjourned sine die with liberty to apply for further directions if required.
4.The costs of the Application be costs in the winding up of the Company.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AP
Associate to Master Russell
23 APRIL 2024
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