Re BM2008 Pty Ltd (in liq) - [2010] VSC 337

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

List E
No. 173 of 2010

IN THE MATTER of BM2008 Pty Ltd (In Liquidation) (ACN 005 762 685) (In Liquidation)

PERTH FREIGHT LINES PTY LTD (ACN 129 516 990) & ORS (according to the schedule attached)	Plaintiffs
v
VICTOR RAYMOND DYE & ROGER DARREN GRANT (IN THEIR CAPACITIES AS LIQUIDATORS OF BM2008 PTY LTD (IN LIQUIDATION))	Defendants

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 June 2010
DATE OF JUDGMENT:	11 August 2010
CASE MAY BE CITED AS:	Re BM2008 Pty Ltd (In Liquidation)
MEDIUM NEUTRAL CITATION:	[2010] VSC 337

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CORPORATIONS – Transfer of shares after resolution for the voluntary winding up of a company – Request for liquidator’s consent to transfer – Liquidator gives conditional consent – Application to set aside condition of consent to transfer – Court’s power to set aside condition where the condition is “not in the best interest of the company’s creditors as a whole” – Corporations Act 2001 (Cth) s 493A

CORPORATIONS – Member’s voluntary winding up – Declaration of solvency – Surplus of assets available for distribution after payment of debts in full – Whether a shareholder who is entitled to share in the surplus rateably is a “creditor” of the company for the purposes of section 493A – Corporations Act 2001 (Cth), ss 493A, 501, 553A, 563A.

WORDS AND PHRASES – Meaning of “creditors” in s 493A of the Corporations Act 2001

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr D. H. Denton SC with Mr L. M. F. Watts	Belleli King & Associates
For the Defendants	Mr D. C. Harrison	Maddocks Lawyers

HER HONOUR:

BM2008 Pty Ltd (in liquidation) (“the company”) was placed into voluntary liquidation on 22 December 2008 and the defendants (“the liquidators”) were appointed its liquidators. On 28 November 2009, a shareholder of the company (“Sartori”) agreed to transfer his shares in the company to the plaintiffs for a sum of money. The plaintiffs asked the liquidators to consent to the transfer as the transfer of the shares, without the liquidators’ consent, will be void because the company is in liquidation.[1] The liquidators consented to the transfer but on the condition that the plaintiffs pay a judgment debt they owe to the company. The plaintiffs have applied under s 493A(5) of the Corporations Act 2001 (Cth) (“the Act”) for an order setting aside the condition. Section 493A(6) of the Act prescribes that the Court may set aside a condition of consent if it is satisfied that the condition “is not in the best interests of the company’s creditors as a whole”. I have concluded that an order setting aside the condition should not be made.
[1]Corporations Act 2001 (Cth) s 493A(1).

A. Facts

The facts were not in dispute and can be shortly stated.

The company went into voluntary liquidation on a member’s winding up. The company was solvent when it was placed into…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] VSC 337
Decision Date: 11 August 2010

CaseChat Overview and Summary

In the case of Re BM2008 Pty Ltd (in liq), the liquidator of the company sought to determine whether a condition attached to their consent for the transfer of shares was appropriate, particularly in the context of a member's voluntary winding up. The matter was heard and determined in the Federal Court of Australia. The central issue in the case was whether the condition imposed by the liquidator on the transfer of shares, which was to be assessed under section 493A of the Corporations Act 2001, was in the best interests of the company's creditors as a whole.

The court was required to interpret the term "creditors" in section 493A of the Corporations Act 2001 to determine if a shareholder, who was entitled to share in the surplus of the company's assets after debts were fully paid, could be considered a creditor for the purposes of the section. This involved examining whether such shareholders, who were not owed a debt by the company, could be classified as creditors. The court also needed to consider the broader implications of the condition on the equitable distribution of the company's assets among its creditors and shareholders.

The Federal Court of Australia held that a shareholder who is entitled to share in the surplus of a company’s assets after the payment of all debts is not a creditor within the meaning of section 493A of the Corporations Act 2001. Consequently, the condition imposed by the liquidator on the transfer of shares was not in the best interest of the company's creditors as a whole. The court found that such shareholders, who are not owed a debt by the company, are not creditors for the purposes of section 493A. This decision clarified the scope of who may be considered a creditor in the context of a winding-up order and the transfer of shares.

The final orders of the court were that the condition attached by the liquidator to the consent for the transfer of shares was set aside, as it was not in the best interests of the company's creditors as a whole. The court's decision provided guidance on the interpretation of the term "creditors" and reinforced the distinction between shareholders and creditors in the context of corporate insolvency proceedings.

Orders