Re: Christmas Island Resort Pty Ltd (receiver and manager appointed)

[1998] FCA 1413

FEDERAL COURT OF AUSTRALIA

CORPORATIONS - appointment of provisional liquidator - whether appointment of receiver and manager as provisional liquidator appropriate - whether appointment appropriate in all the circumstances.

Corporations Law, ss 420(2)(u), 472(2), 532(2), 532(1A)

Bank of New Zealand v Essington Developments Pty Ltd [1991] 9 ACLC 1039, applied

IN THE MATTER OF CHRISTMAS ISLAND RESORT PTY LTD (ACN 009 160 123) (RECEIVER AND MANAGER APPOINTED)
WG 3031 of 1998

R D NICHOLSON J
PERTH
20 OCTOBER 1998

NO QUESTION OF PRINCIPLE

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WG 3031 of 1998

IN THE MATTER OF CHRISTMAS ISLAND RESORT PTY LTD (ACN 009 160 123) (RECEIVER AND MANAGER APPOINTED)
JUDGE:	R D NICHOLSON J
DATE OF ORDER:	20 OCTOBER 1998
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The time for hearing of the application be abridged.

2. Jeffrey Laurence Herbert (“Herbert”) of PPB Ashton Read, Level 6, 225 St George’s Terrace Perth in the State of Western Australia, Chartered Accountant, have leave to be appointed the Provisional Liquidator of the Company until the making of a winding up order herein or until further order.

3. The duties to be performed by the Provisional Liquidator are as follows:

   (a)To take possession of, collect and protect the assets of the Company;

   (b)To receive and collect the debts due to the Company;

   (c)To discharge, pay and appropriate to his own use absolutely

   (i)rents, wages, salaries, costs and other current expenses of the Company;

   (ii)amounts incurred for the purposes of subparagraph (d) hereof; and

   (iii)costs, expenses and disbursements incurred by him in his capacity as receiver and manager of the company.

   (d)To carry on the business of the Company until further order but so far as is necessary for the rearrangement, beneficial disposal, sale or winding up of that business;

   (e)To sell or otherwise dispose of, in any manner, all or any part of the property of the Company;

   (f)Generally exercise such of the powers conferred on a liquidator by section 477(2)(a) to (k) of the Corporations Law as may be necessary for any of the foregoing purposes.

4. The nature and description of the property of which the Provisional Liquidator is to take possession is all the assets and property of the company.

5. The bank at which the provisional liquidator is to open a trust account is the St Georges Terrace Perth branch of Challenge Bank in the said State.

6. The costs of the application be costs in the winding up.

7. The Provisional Liquidator have liberty to apply.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NO QUESTION OF PRINCIPLE

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WG 3031 of 1998

IN THE MATTER OF CHRISTMAS ISLAND RESORT PTY LTD (ACN 009 160 123)
(RECEIVER AND MANAGER APPOINTED)

JUDGE:	R D NICHOLSON J
DATE:	20 OCTOBER 1998
PLACE:	PERTH

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR: A motion is brought on behalf of the applicant for the appointment of a person who is presently the receiver and manager and who is an official liquidator to have the leave of the court pursuant to s 532(2) and s 532(1A) of the Corporations Law to be appointed as the provisional liquidator of the company until the making of a winding-up order herein or until further order. 

The appointment and powers of the receiver and manager have been the subject of earlier reasons delivered on 14 July 1998, 29 July 1998 and 7 October 1998.  It is necessary to state briefly the reasons for the court making the additional orders pursuant to the present motion.

The company is a duly incorporated proprietary company carrying on business on Christmas Island.  The receiver and manager was appointed on 29 July 1998.  He has completed his duties of analysing and reporting on the financial status of the company. 

This application is brought by the receiver and manager under s 420(2)(u) of the Corporations Law, which authorises a receiver to make application in the company's name for its winding up.  There is authority in Bank of New Zealand v Essington Developments Pty Ltd [1991] 9 ACLC 1039 that a receiver who has formed the view on proper grounds that a corporation is insolvent and that it would be conducive to the preservation or recovery of its assets that it should be wound up, may apply under s 420(2)(u) in the corporation's name for its winding up.

It will necessarily take some time for the pending application for winding up to be dealt with. It is submitted for the applicant that in the meantime the interests of the company would be best served if the Court were to exercise its discretion under s 472(2) of the Corporations Law to appoint a provisional liquidator.  For that reason, leave is sought.

In making an appointment of a provisional liquidator the Court must be satisfied that there is a valid and duly authorised winding-up application and that there is a reasonable prospect a winding-up order will be made.  In my opinion each of those conditions is satisfied in this matter. 

There is a report from the receiver and manager stating his opinion that the company is insolvent.  In the application to wind up, the grounds on which it is stated that reliance will be placed that the company is insolvent are:

1. the company has a working capital deficiency;

1. the company has many creditors whose debts are due and owing and does not have the capacity to pay those creditors;

(2)

1. certain facts set out in affidavits before the court which support those contentions.

In my opinion that evidence supports a finding, which I make, that there is a reasonable prospect  a winding-up order will be made.

Nevertheless, the Court has a discretion in all the circumstances.  One of the matters that must weigh in that discretion is the preservation of the assets of the company for the creditors and the maintenance of the status quo pending the determination of the winding-up application.  The Court must also have in mind the need to get in and realise the remaining assets for the benefit of the creditors.

There is specific evidence in support of the present application that the assets of the company are in jeopardy.  In particular its core assets are in jeopardy.  They are currently non-producing.  Most importantly, they depend on the continuance of leases granted by the Commonwealth of Australia for their existence.  The possibility of those leases being rescinded or subjected to forfeiture is supported by the evidence. There is also clear evidence of deterioration of assets to an excessive degree.  There is the conclusion of the receiver and manager that the company is insolvent.  In addition there is evidence of a breakdown in the management of the company in that the directors are not participating in management or cooperating with the receiver and manager in making any proposal to him.  It is clear that the appointment of a provisional liquidator will be an additional step which will protect the company's remaining realisable assets in the interest of creditors. It is the most expeditious mechanism for dealing with the threat to those assets in all the circumstances.

In the minute of proposed orders the duties of the provisional liquidator are widely cast.  Unlike the first order appointing the receiver and manager, those orders contain no limitation in respect of the sale or realisation of the property of the company.  In my opinion that is appropriate because the receiver and manager who would become the provisional liquidator by these orders now has full knowledge of all factors affecting the company and its assets.  The original order was made so as to enable the receiver and manager to become possessed of that knowledge and to enable the Court to have the opportunity of considering whether the sale of assets, core or non-core, was in the interests of those involved with the company as creditors or otherwise.  That point has now been passed and it is clear that a provisional liquidator acting as an officer of the Court according to law should now have the powers such as those set out in the minute.  It is necessary that the provisional liquidator be able to move quickly and effectively if he is to be able to salvage even the core assets.

For those reasons, I consider that it is appropriate the orders be made in accordance with the minute and I now make those orders.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R D NICHOLSON

Associate:       

Dated:            

Counsel for the Applicant:	R L McKenzie
Solicitor for the Applicant:	Clayton Utz
Date of Hearing:	20 October 1998
Date of Judgment:	20 October 1998