Re Avonwood Homes Pty Ltd (No 2)

[2000] VSC 253

SUPREME COURT OF VICTORIA          

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 5305 of 2000

IN THE MATTER of AVONWOOD HOMES PTY LTD
   (Provisional Liquidator Appointed)

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	8 June 2000
DATE OF JUDGMENT:	8 June 2000
CASE MAY BE CITED AS:	Re Avonwood Homes Pty Ltd [No. 2]
MEDIUM NEUTRAL CITATION:	[2000] VSC 253

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Corporations – application by provisional liquidator for directions – s. 477(2B) Corporations Law.

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APPEARANCES:	Counsel	Solicitors
For Paul Anthony Pattison (in his capacity as Provisional Liquidator of Avonwood Homes Pty Ltd)	Mr I.R. Jones	Madgwicks
For HIH General Casualty Insurance Ltd and FAI General Insurance Company Ltd	Mr I.H. Percy	Phillips Fox

HIS HONOUR:

1. This is an application by interlocutory process dated today by the provisional liquidator of Avonwood Homes Pty Ltd for orders that the provisional liquidator have power to enter into and execute on behalf of the company an agreement with HIH General and Casualty Insurance Limited in the form of Exhibit PAP‑3 to the affidavit of Paul Anthony Pattison, sworn 7th of June 2000, and also to enter into and execute on behalf of the company certain mortgages referred to in that agreement.

1. Subject to there being one agreed amendment to the form of agreement contained in the exhibit, namely, the deletion of clause 49.2, that exhibit contains the document which the applicant seeks power to enter into.

1. The application also seeks an order approving the entry into of that agreement, and those mortgages, pursuant to s.477(2B) of the Corporations Law, because the agreement is one and the mortgages are ones which fall within the class referred to in that sub‑section. In substance, obligations might extend beyond the three months period referred to.

1. The application also seeks an order by way of clarification of the previous order made when the provisional liquidator was appointed that the provisional liquidator have power to carry on the company's business and certain other powers referred to in the Corporations Law, in effect restating s.472(4)(a) and (b).

1. The full purposes of the application and the mechanism adopted, I need not repeat.  They are adequately summarised in the affidavit of Mr Pattison sworn in support of the application, and also an affidavit of  Mr Martin, the National Claims Manager, Builders Warranty of HIH General and Casualty Insurance Limited, which is by leave also represented here today.

1. Mr Martin, in his affidavit, deposes to the fact that the agreement will enable the construction or completion of approximately 200 of the homes which are at present incomplete, and generally that the interests of the "homeowners" and indeed creditors generally will be protected, at least to some extent, by the arrangement.

1. Insofar as the application seeks to simply confirm what the provisional liquidator's powers are, I have no difficulty with it.  It is clearly the intent of the legislation that, whatever may have been the position under prior corporate legislation, a provisional liquidator should have power in appropriate circumstances to carry on the company's business.

1. In the circumstances referred to in the affidavits, this seems to be such a case, because the completion of at least some of these homes, and hopefully there might be arrangements in relation to others of them in the future, is in the interests of the parties to the construction contracts with the company, and also in the interests of creditors generally.  And I note that some of the major creditors are, according to the affidavits, supportive of this application.

1. The main area where the court has a discretion to exercise relates to the granting of the approval under s.477(2B) of the Corporations Law. I note that it was said in State Bank of New South Wales v. Turner Corporation Limited (1994) 14 ACSR 480 at 483 that the court is not a rubber stamp for what is put forward by the liquidator, but it is not the role of the court to independently appraise the commercial soundness of the proposal, and the court will not generally interfere unless there can be seen to be some lack of good faith error in law or principle or some real or substantive ground for doubting the prudence of the liquidator's proposal. In that regard see also Re Aslor Pty Ltd (1997) 24 ACSR 612; Re Spedley Securities Limited (1992) 9 ACSR 83, and Corporate Affairs Commission v. ASC Timber Pty Ltd (1998) 29 ACSR 109, especially at 118.

1. Giving due regard to the provisional liquidator's commercial judgment and knowledge of the relevant circumstances, I do not perceive that there is any error of law or ground for suspecting bad faith or impropriety involved in this application; rather, the application seems to be one in the interests of the company and its creditors.

1. Subject to the one amendment to the agreement ‑ which I suggested and which the parties have agreed to ‑ it is not possible for the court to assess the commercial adequacy or efficacy of the agreement. That is a matter for the provisional liquidator. But I am satisfied that the court should, for the purposes of s.477(2B) of the Corporations Law approve the entry into that agreement of the provisional Liquidator.

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