Re Brodhan Pty Ltd (in administration)
[2011] VSC 265
•17 June 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
CORPRATIONS LIST
S CI 2011 3049
IN THE MATTER OF BRODHAN PTY LTD (ACN 128 360 216) (in administration)
B E T W E E N
| RODNEY JAMES SLATTERY and WARREN BRIAN WHITE (as joint and several administrators of Brodhan Pty Ltd) (ACN 128 360 216) (in administration) | Plaintiffs |
| v | |
| BRODHAN PTY LTD (ACN 128 360 216) (in administration) | Defendant |
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JUDGE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 June 2011 | |
DATE OF JUDGMENT: | 17 June 2011 | |
CASE MAY BE CITED AS: | Re Brodhan Pty Ltd (in administration) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 265 | |
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CORPORATIONS – External administration – administrators appointed under Part 5.3A of the Corporations Act 2001 (Cth) – application by administrators for order that company be wound up in insolvency under section 459P of the Act before adjourned second meeting of creditors of company convened pursuant to S. 439A of the Act – application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Kohn | Hunt & Hunt |
HIS HONOUR:
The plaintiffs, who are the administrators of Brodhan Pty Ltd (“the company”) make application that the company be wound up in insolvency under s 459P of the Corporations Act 2001 (“the Act”) prior to the second meeting of creditors which is scheduled to take place next week.
The application was listed as a matter of urgency on the insistence of the solicitors acting for the plaintiffs. The proceeding has not been advertised nor was the making of this application foreshadowed at the meeting of creditors conducted by the plaintiffs in the administration of the company.
On 14 February 2011, a fixed and floating charge in favour of Metcash Trading Limited and Australian Liquor Marketers Pty Ltd (“the charge”) was given by the company. The charge was registered on 23 February 2011.
On 2 May 2011, the plaintiffs were appointed as joint and several administrators of the company pursuant s 436A of the Act. The first meeting of creditors was held on 12 May 2011. The second meeting of creditors convened pursuant to s 439A of the Act was held on 6 June 2011 and adjourned to 20 June 2011, next Monday. As such, the company is presently under administration. Mr Kohn of Counsel, who appeared on behalf of the plaintiffs, indicated that the purpose of the adjournment of the creditors’ meeting to 20 June was to “enable negotiations to take place with the chargees”.
The plaintiffs say that no deed of company arrangement has been proposed and that the most likely result at the meeting is that the creditors would resolve that the company be wound up pursuant to s 439C.
The plaintiffs’ stated purpose for making the application is said to be to attract the operation of s 588FJ of the Corporations Act, which applies only to companies which are being wound up in insolvency.
Section 588FJ provides relevantly:
588 FJ (1) This section applies if:
(a) a company is being wound up in insolvency; and
(b)the company created a floating charge on property of the company at a particular time that is at or after 23 June 1993 and:
(i) during the 6 months ending on the relation-back day; or
(ii)after that day but on or before the day when the winding up began.
(2)The charge is void, as against the company's liquidator, except so far as it secures:
(a)an advance paid to the company, or at its direction, at or after that time and as consideration for the charge; or
(b)interest on such an advance; or
(c)the amount of a liability under a guarantee or other obligation undertaken at or after that time on behalf of, or for the benefit of, the company; or
(d)an amount payable for property or services supplied to the company at or after that time; or
(e)interest on an amount so payable.
(3)Subsection (2) does not apply if it is proved that the company was solvent immediately after that time.
(4) …
(5)…
(6)…
Mr Kohn referred me to the decision of Barrett J of the Supreme Court of New South Wales in Hadfield v ACN 092 328 400 Pty Ltd[1] as to when the section applies but I do not regard it as controversial proposition that the section only applies to a winding up in insolvency. The plaintiffs envisage making application to set aside the charge under s 588FJ by reason that it, at least in part, secures advances made to the company prior to the granting of the charge. It is said that such advances which took place prior to the granting of the charge would not be secured by the charge and the charge would be void to such an extent. The report as to creditors contends that the charge is void to the extent of $300,000.
[1][2011] NSWSC 114.
In my view, one issue arises at the threshold in respect of the application. Section 459P of the Act specifies the persons who may apply for a company to be wound up in insolvency. An administrator appointed to a company is not among those mentioned in s 459P(1). The company itself may apply under s 459P(1) and it was suggested that the administrators had power under s 437A to bring the application in the name of the company but in my view the power granted by that section does not extend to an application of the present character. . The company is not in any event the applicant in this application. I note that liquidators and provisional liquidators are specifically mentioned as having standing under s 459P, but not administrators.
In my view, the plaintiffs lack standing as administrators to apply for an order for winding up order in insolvency.
While the appointment of administrators is predicated on an assumption that the directors consider that the company is insolvent or may be about to become insolvent such appointment does not give rise to a presumption that the company is insolvent under s 459C(2). However, the report of the plaintiffs compiled for the purpose of consideration at the second creditors’ meeting establishes to my satisfaction that the company insolvent. It has creditors of $1.4M and only $30K cash to pay them. Even if it is assumed that part of the charge is void, the unsecured creditors are only expected to receive a dividend of 4 cents in the dollar.
It is said that the making of a winding up order in insolvency is necessary today (or at least before the second meeting of creditors next week), in order to attract the provisions of s 588FJ. I do not understand why this is so. If the company is placed into liquidation by resolution of the creditors next week, it will then be possible for the plaintiffs, who will presumably be appointed as the liquidators, to bring an application for winding up in insolvency. On my analysis which appears below, the relation back day in such a winding up will be the same whether or not such a winding up order is made during the administration period or after the company has been wound up voluntarily by its creditors, so this is not a relevant consideration.
Section 9 defines relation back day in relation to the winding up of a company as meaning:
(a)if because of Division 1A of Part 5.6 the winding up is taken to have begun on the day when the order that the company or body be wound up was made – the day on which the application for the order was filed
(b)otherwise the day on which the winding up is taken because of Division 1A of Part 5.6 to have begun.
If an order was made today winding up the company in insolvency, the relation back day in the winding up would be governed by s 513A(b) of the Act which provides that such a winding up is taken to have begun or commenced … “on the s 513C day in relation to the administration”.
The s 513C day in relation to the administration in such an instance is, by operation of s 435C(1)(a) the day the administration began, 2 May 2011, the day the administrators were appointed.
On the other hand, if an order for winding up in insolvency is not made until after the creditors resolve that the company be wound up (and a winding up is therefore then “in progress”), s 513A(a) provides:
If, when the order was made, a winding up of the company was already in progress – when the last mentioned winding up is taken because of this Division to have begun or commenced.
The “last mentioned winding up” is the creditors’ voluntary winding up commenced consequent on the resolution of creditors to wind up the company. Section 513B(b) provides that that winding up is taken to have begun or commenced:
“– on the s 513C day in relation to the administration”.
Both scenarios result in the same relation back day, 2 May 2011.
It seems that from exchanges that Mr Kohn and I had in Court when I enquired about the need for this matter to be dealt with before next week’s meeting, the plaintiffs’ concern is that if an order is not made winding up the company in insolvency before then, that by one means or another those associated with the company will bring about a situation to prevent the company from being wound up in insolvency, presumably by the company entering into a deed of company arrangement. If this be so (and there is no evidence of that or how it would come about), that would be an incident of the provisions of Part 5.3A of the Act. If this occurs by reason of the actions of related creditors to the disadvantage of the unrelated unsecured creditors, there are means under Part 5.3A of the Act to address this.
There is presently no proposal which will be put before the meeting resulting into the company entering into a deed of company arrangement and it is inconceivable that the company will be returned to its directors. Accordingly, the most likely outcome is that the company will be placed into voluntary liquidation and if the plaintiffs consider it appropriate, they can at that point make an application for the winding up of the company in insolvency and the provisions of s 588FJ will then apply.
I will dismiss the application.
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