Re Bell Group NV (in Liq); [No 4] - [2023] WASC 151

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE BELL GROUP NV (IN LIQ); EX PARTE TREVOR [No 4] [2023] WASC 151
CORAM:   HILL J
HEARD:   9 MAY 2023
DELIVERED          :   9 MAY 2023
PUBLISHED           :   12 MAY 2023
FILE NO/S:   COR 57 of 1996
MATTER:   IN THE MATTER OF BELL GROUP NV (IN LIQ)

EX PARTE
GARRY JOHN TREVOR AS LIQUIDATOR OF BELL GROUP NV (IN LIQ) AND BELL GROUP NV (IN LIQ)
Applicants

Catchwords:

Corporations - External administration - Ancillary winding up - Application by liquidator for release - Application for termination of winding up - Application for rectification of register maintained by Australian Securities and Investments Commission to remove company from register of foreign companies - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) s 480, s 482, s 583, s 601CL, s 1322(4)(b), s 1322(6)(c)

Supreme Court (Corporations) (WA) Rules 2004 (WA) r 7.5

Result:

Application granted

Category: B

Representation:

Counsel:

Applicants

A D'Arcy

Solicitors:

Applicants

LK Law

Cases referred to in decision:

Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; (2008) 71 NSWLR 262
Re Wayland [2005] NSWSC 1; (2005) 52 ACSR 750

HILL J:

(This judgment was delivered extemporaneously and has been edited from the transcript.)

On 4 April 2023, Mr Garry John Trevor and Bell Group NV (BGNV) filed an interlocutory application seeking orders that Mr Trevor be released as liquidator of BGNV, the winding up of BGNV be terminated and that ASIC remove BGNV from the register of foreign companies maintained pursuant to Pt 5B.2 div 2 of the Corporations Act 2001 (Cth) (Act).
The applicants filed three affidavits in support of the application: an affidavit of Mr Trevor filed 4 April 2023, and two affidavits of Sarah Grace Schultz, a solicitor employed by the applicants' solicitors, filed 24 April 2023 and 1 May 2023. I have also had the significant benefit of a detailed outline of written submissions and oral submissions from counsel for the applicants.

Factual Background

The factual background to this application can be briefly summarised as follows.
BGNV was incorporated in the Netherlands Antilles (now Curaçao) on 27 November 1985, as a wholly owned subsidiary of Bell Group Finance Pty Ltd (in liquidation) (subject to scheme of arrangement) (BGF).
In 1985 and 1987, BGNV issued three series of subordinated bonds guaranteed by The Bell Group Ltd (TBGL) and convertible into ordinary shares of TBGL. Initially, The Law Debenture Trust Corporation plc (LDTC) was the trustee for these bonds. In 2021, LDTC was replaced as trustee by Madison Pacific.
BGNV lent the proceeds of the first bond issue to TBGL and the proceeds of the second and third bond issues to BGF.
On 3 January 1995, Troika Holding BV was appointed liquidator of BGNV in the Netherlands Antilles by resolution of BGNV's sole shareholder, BGF.
On 21 March 1996, Troika applied to the Supreme Court of Western Australia for orders that BGNV be wound up in insolvency and that Mr Trevor be appointed liquidator of BGNV.
On 3 April 1996, Troika applied to register BGNV as a foreign company and on 4 April 1996, BGNV was registered as a foreign company in Australia.
On 19 July 1996, Mr Trevor was appointed the Australian liquidator of BGNV. The winding up of BGNV in Australia is ancillary to the principal insolvency administration of BGNV in Curaçao.
On 26 March 1997, the Supreme Court of Western Australia ordered that BGNV be wound up as an insolvent Pt 5.7 body and appointed Mr Trevor the ancillary liquidator of BGNV in Australia.
Since being appointed as liquidator, Mr Trevor has recovered more than $650 million in assets of BGNV within the jurisdiction and has remitted the net proceeds to BGNV's principal administration in Curaçao. No Australian creditors have lodged proofs of debt in the liquidation of BGNV in Australia.
There are only two entities with a financial interest in the net recoveries of the principal winding up of BGNV in Curaçao, namely:
(a)SquareTwo Capital Limited - who is the assignee of a funding agreement between Plaza BV and the Curatoren and who is entitled to 70% of the net recoveries of the winding up; and
(b)Madison Pacific - whose predecessor, LDTC, is the sole creditor of BGNV, and is entitled to the remaining balance of 30%.
On the evidence before me, I accept that BGNV had a substantial deficiency of assets compared to liabilities and there will not be any surplus available to distribute to its sole contributory, BGF.

Legal principles

Release of liquidator

Section 480 of the Act provides that a liquidator of a company may apply to the court for an order that they be released if the conditions in either s 480(a) or s 480(b) are satisfied.
These conditions are satisfied when the liquidator has either:
(1)realised all of the property of the company, or so much of it as can in his or her opinion be realised without needlessly protracting the winding up, and has distributed a final dividend to the creditors (s 480(a)); or
(2)resigned or been removed from office (s 480(b)).
BGNV is a registered foreign company and is not a 'company' for the purposes of s 480 of the Act. BGNV's liquidation is governed by s 583 of the Act, which provides that Ch 5 of the Act (which includes s 480) applies to the winding up of BGNV 'with such adaptions as are necessary'. I accept on the basis of the authorities referred to by the applicants, that s 480 applies to the liquidation of BGNV.
As was noted by Barrett J in Re Wayland[1] at [15]:
[T]he effect of s 583 is to make the provisions of Ch 5 as a whole applicable to the winding up of a Pt 5.7 body subject to two qualifications: first, the specific adaptations stated in s 583 itself must be made; and, second, the applicability of any given Ch 5 provision is to be judged according to the circumstances of the particular case. The Ch 5 provisions as a whole, insofar as they deal with winding up, are concerned with the winding up of companies registered under the Corporations Act. Sheppard AJA referred to differences in character and activities as among bodies made susceptible to winding up under Pt 5.7. There are also differences in character and activities between companies registered as such under the Corporations Act and the various kinds of Pt 5.7 bodies. The non-specific adaptations directed by s 583 must, in my opinion, take account of such differences as there actually are, as to relevant matters, between the circumstances of a domestic company in the course of winding up and the circumstances of the winding up of the particular Pt 5.7 body.
[1] Re Wayland [2005] NSWSC 1; (2005) 52 ACSR 750.
His Honour went on to hold at [20] that:
s 480 applies in a case such as the present on the footing that s 480(a) is concerned only with creditors and contributories having some logical connection with Australia which is of such a kind as to produce an expectation that their rights, claims and liabilities will be dealt with in the local winding up rather than in the principal administration in the place of incorporation or in some other ancillary administration in another place. That, it seems to me, is an adaptation indicated by the nature of the Pt 5.7 body and the circumstances pertaining to it and, therefore, an adaptation directed by the general specification in s 583.
In considering whether or not to grant the release sought, the court may cause a report on the accounts of the liquidator to be prepared by an auditor (s 481(1)(a)). On the liquidator complying with all the requirements of the court, the court must take into consideration any such auditor's report, and any objection against the release of the liquidator that is made. The court then must either grant or withhold the release (s 481(1)(b) & (c)). The usual requirements of the court are set out in r 7.5 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Corporations Rules).
The effect of any release ordered by the court is to discharge the liquidator from all liability in respect of any act or default made by them in the administration of the company's affairs or otherwise in relation to their conduct as liquidator.
For this reason, strict compliance with all statutory prerequisites and the requirements of the Corporations Rules is generally necessary before a release will be ordered.
Where an applicant has demonstrated they have strictly complied with these matters, the court then has a discretion whether or not to grant or withhold the release. However, where compliance has been established and there is no objection to the release by any creditor and no concern has been raised as to the performance of the liquidator's duties, the court will generally grant the release, unless any reason emerges as to why it should not do so.

Termination of winding up

Mr Trevor also seeks an order under s 482(1) to terminate the winding up. Section 482 provides that:
482Power to stay or terminate winding up
(1)At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.
(1A)An application may be made by:
(a)in any case - the liquidator, or a creditor or contributory, of the company; …
There are no criteria set out in the Act to indicate when an application to terminate a winding up will be granted. The power to make an order under s 482(1) is discretionary and the onus is on the applicant to make out a positive case for termination.
While it is not necessary for the court to find special reasons exist to grant an application to terminate a winding up, there must be some valid reason for the exercise of discretion, taking into account the interests of the creditors, the liquidator, the members of the company and weighing in the balance the public interest.
The factors that will generally inform the exercise of the court's discretion to terminate a winding up include:
(a)the attitude and interests of creditors (including future creditors who might be prejudiced if the company was released from winding up);
(b)the interests of the liquidator (particularly with respect to costs) and contributories;
(c)the nature and extent of creditors and whether all debts have been discharged;
(d)the company's current trading position and general solvency;
(e)any explanation for any non-compliance by directors with their statutory duties and of the circumstances leading to the winding up order;
(f)the nature of the company's business; and
(g)the public interest, including the public interest in upholding commercial morality.

Order for rectification of register

Section 1322(4)(b) provides that the court may, on the application by any interested party involved, make an order directing the rectification of any register kept by the Australian Securities and Investments Commission (ASIC) under the Act. The court must not make an order under this provision unless it is satisfied that no substantial injustice has been or is likely to be caused to any person (s 1322(6)(c)).
In Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd,[2] Spigelman CJ (with whom Tobias JA and Campbell JA agreed) discussed the circumstances in which s 1322(4)(b) applied. Relevantly, his Honour noted that the word 'rectify' had a range of meanings including to correct, to remedy, to make right, and to abolish.[3] His Honour held that the requirement of positive satisfaction under s 1322(6)(c) indicated the court should not make an order under s 1322(4)(b) where the fundamental purposes served by the register would be compromised,[4] and that the textual context of s 1322(4)(b) was more consistent with a broader interpretation of the word 'rectify'. However, as his Honour noted, in considering any application under the section it is necessary to consider the relevant legislative regime that applies to the specific register.
[2] Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; (2008) 71 NSWLR 262.
[3] Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [47].
[4] Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [49].
In this case, the relevant register is the register of foreign companies, which is governed by Pt 5B.2, div 2 of the Act. Relevantly, the Act prohibits foreign companies carrying on business in Australia unless they are registered, or have applied to be registered and the application has not been dealt with (s 601CD).
There are several means by which a foreign company can be removed from the register. First, pursuant to s 601CL(1), where a foreign company ceases to carry on business in the jurisdiction, they must lodge a written notice that it has ceased to carry on business. However, as was pointed out by counsel for the applicants, this does not impose any obligation on ASIC to remove the foreign company from the register. Second, where notice is given that the foreign company has been dissolved or deregistered, pursuant to s 601CL(2), ASIC is required to remove the foreign company's name from the register. Third, pursuant to s 601CL(3), where ASIC has reasonable cause to believe the foreign company does not carry on business in this jurisdiction, ASIC can give a show cause notice to the foreign company. Once again however, this does not oblige ASIC to remove the foreign company from the register, but only gives ASIC a discretion as to whether that will occur.

Disposition

For the following reasons, I am satisfied that it is appropriate to order the release of Mr Trevor pursuant to s 480 of the Act.
First, on the basis of the authorities summarised above, I am satisfied that the applicants can seek orders under s 480 of the Act.
Second, I am satisfied that the statutory pre-requisites set out in s 480 have been met. Specifically, I am satisfied that, on the evidence before the court, Mr Trevor has realised all the property of BGNV in Australia, has distributed the net recoveries to the principal liquidators (the Curacao Bankruptcy Curatoren) in accordance with s 601CL(15)(c) of the Act, and has not been required to adjust the rights of its contributory nor to pay any return to BGF. On this basis, I accept that Mr Trevor's functions as liquidator of BGNV have come to an end. For these reasons, I am satisfied that Mr Trevor meets the requirements of s 480(a).
Third, on the evidence before the court as summarised at [18] of the applicants' submissions, I am also satisfied that the requirements of r 7.5 of the Corporations Rules have been met. I am satisfied that notice of the application has been drawn to the attention of all interested parties including ASIC, BGNV's shareholder as well as the Bell Group Ltd, SquareTwo Capital Ltd and the Curatoren.
One of the requirements imposed by r 7.5, where an application is made under s 480, is to explain why BGNV should not be deregistered. In this case, Mr Trevor has proffered an explanation, namely that as a foreign company incorporated in Curaçao, ASIC has no power to deregister the company. I also note that the applicants have sought orders under s 482 to terminate the winding up and under s 1322(4)(b) to remove BGNV from the register of foreign companies.
Given the applicants have established strict compliance with the statutory pre-requisites, that no objection has been raised to the orders sought, the application is supported by BGNV's primary creditor (SquareTwo), its sole shareholder and the Curatoren, and no concern has been raised by anyone about the performance of the liquidators, apart from in the context of what is aptly described by counsel for the applicants as 'long running and acrimonious litigation', it is appropriate, consistent with the legal principles summarised above, to grant the release.
Fourth, there is no reason that the order for the release of Mr Trevor should not be made. Given the long and protracted history of the liquidation of BGNV and its related companies and the significant amounts of litigation that have been involved with these liquidations, in my view, it is appropriate for Mr Trevor to receive the protection of an order of release.
I turn then to the question as to whether the winding up of BGNV should be terminated. I am satisfied that I have the power under s 482 of the Act to order the termination of the ancillary winding up of BGNV.
I accept that Mr Trevor, as the liquidator of BGNV, has standing to bring the application. I am also satisfied that ASIC has been served with the application, as required by r 2.8(3) of the Corporations Rules.
For the following reasons, I am satisfied that it is appropriate to order the termination of the winding up of BGNV.
First, the winding up of BGNV was an ancillary winding up. The evidence before the court is that nothing remains to be done; all of the property in the jurisdiction has been recovered and distributed.
Second, BGNV has no creditors in Australia. On this basis, I accept that no creditor will be prejudiced if the winding up is terminated.
Third, BGNV has no assets available to be paid to its contributory. BGF, its sole shareholder does not oppose the termination of the winding up.
Fourth, the application is supported by BGNV's primary creditor (SquareTwo), its sole shareholder and the Curatoren.
In addition, under s 481(4), where the release has been granted as I have already ordered, the effect of the granting of release will mean that the liquidator is removed from office. In these circumstances it is appropriate to terminate the winding up so that the company is not left in the position where the winding up continues but there is no liquidator appointed. In my view, it is also consistent with the Corporations Rules as to the requirement in 7.5(3)(m) that there be a specific explanation as to why, if a release is given, the company should not be deregistered. It is consistent with each of these principles that the winding up be terminated.
I then turn to the question as to whether an order should be made under s 1322(4)(b) to remove BGNV from the register of foreign companies. As was noted by Spigelman CJ in Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd, the power under this section extends to a range of different registers which perform various functions. In my view, the requirement of ASIC to have a register of foreign companies is simply so that there is a record of the foreign companies that carry on business in Australia. In those circumstances, the power to rectify the register has to be given a broad meaning which takes account of the fact that that is the sole purpose of this register. I have been assisted significantly by the submissions of counsel for the applicants who emphasised that there is no specific provision under Pt 5B.2 div 2 which enables BGNV, of its own right, to remove itself from the register. The broad right under s 601CL(1) to give notice that it has ceased to carry on business does not carry with it an obligation on ASIC to remove BGNV from the register. In these circumstances, I am satisfied that I have power under s 1322(4)(b) to rectify the register so that it reflects the factual position which will operate after the orders are made today, namely that the winding up has been terminated and that BGNV does not carry on business in Australia.
I turn then to the question as to whether I should exercise that discretion. In my view, for the following reasons, it is appropriate that an order should be made to remove BGNV from the register.
First, in my view, such an order would be consistent with the position under Australian law if it was an Australian registered company, which would be that on an order being made to release the liquidator, it would be usual for an order that the company be deregistered. Removing BGNV from the register of foreign companies will have that same effect.

Second, I am satisfied on the evidence before me that BGNV has no remaining assets or business in Australia and, unless an order is made in the terms sought, it will remain a registered foreign company under Pt 5.7 of the Act.
In respect as to whether such an order would be likely to cause any substantial injustice to any person, for the reasons discussed with counsel, I accept that no such prejudice arises in the present case as, first, BGNV has no ongoing presence in Australia and importantly, there are no Australian creditors. In my view, in the circumstances of a winding up, the primary stakeholders whose interests should be given consideration to, are the creditors of the company. I also take account of the fact that all of the stakeholders who have an interest in the Australian liquidation have been notified of the application, including ASIC, and none have sought to be heard on the application or put forward any reason as to why the orders should not be made.

Conclusion and Orders

For these reasons, I am satisfied, in the circumstances of this case, it is appropriate to make orders in terms of the interlocutory process filed 4 April 2023.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
12 MAY 2023