Re Genoa Resources and Investment Limited (in liq)

[2005] NSWSC 1145

CITATION:	Re Genoa Resources and Investment Limited (in liq) [2005] NSWSC 1145
HEARING DATE(S):	31 October 2005
JUDGMENT DATE :	31 October 2005
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Leave granted

CATCHWORDS:	CORPORATIONS - winding up - committee of inspection - application by liquidator for leave to enable two members of committee of inspection to accept a gift for their services rendered
LEGISLATION CITED:	Companies Code
CASES CITED:	Re Security Directors Pty Limited (1997) 15 ACLC 1083
PARTIES:	Ronald John Dean-Willcocks in his capacity as official liquidator of Genoa Resources & Investment Limited (in liq) - Plaintiff
FILE NUMBER(S):	SC 2789/89
COUNSEL:	J T Johnson - Plaintiff
SOLICITORS:	Kemp Strang - Plaintiff

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

MONDAY 31 OCTOBER 2005

2789/89 RONALD JOHN DEAN-WILLCOCKS IN HIS CAPACITY AS OFFICIAL LIQUIDATOR OF GENOA RESOURCES AND INVESTMENT LTD (IN LIQ)

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is an application by the liquidator of a company to grant leave to two members of the Committee of Inspection to accept a gift.

2 The company was placed into liquidation on 31 October 1989. Thus, its liquidation has been proceeding now for sixteen years.

3 A Committee of Inspection was appointed on 10 April 1990, comprising three representatives of shareholders, and three representatives of creditors. One of the shareholders’ representatives has died. The other two have been members of the Committee of Inspection continually since they were first appointed. It is to those two members of the Committee of Inspection that the liquidator seeks leave to pay a gift.

4 The liquidation has been an unusually complicated one. There has been considerable litigation, and the financial affairs of the company itself have been most complicated, quite apart from that litigation.

5 In his affidavit the liquidator has given the two members of the Committee of Inspection very high praise. He says that they have attended virtually every meeting of the Committee of Inspection, and that they have both remained and been unswervingly diligent in the performance of their duties.

6 The liquidation, commencing as it did in 1989, is conducted under the provisions of the Companies Code. Section 435 of the Code says:

“(1) A member of the committee of inspection shall not, while acting as such a member, except as provided by this Code or with the leave of the Court --
(a) make an arrangement for receiving, or accept, from the company or any other person, in connection with the winding up, a gift, remuneration or pecuniary or other consideration or benefit;
(b) directly or indirectly derive any profit or advantage from a transaction, sale or purchase for or on account of the company or any gift, profit or advantage from a creditor …”

7 The policy and history of that section had been examined by Senior Master Mahony in the Supreme Court of Victoria in Re Security Directors Pty Limited (1997) 15 ACLC 1083. I accept the conclusion there arrived at, that there is power for the Court to grant leave under s 435 even after the work in question had been done.

8 I also accept the principles articulated in the judgment, to the effect that:

(1) The work of members of the Committee of Inspection is generally expected to be done on an honorary basis, and it is only in exceptional circumstances that leave ought be granted for committee members to receive remuneration.

(2) The structure of s 435 is such that, once the Court is satisfied that a case is sufficiently different from the normal so as to justify the favourable exercise of a discretion, the Court has power to depart from the general prohibition under s 435, whereby a member of the Committee of Inspection cannot receive a gift without leave.

(3) The amount approved must be one which is fair to the general body of creditors, and no more than reasonable remuneration for the services provided.

(4) The nature of the services themselves should be considered, and whether they are the type of services that one would ordinarily expect to pay for.

9 The committee members in the present case have attended meetings which are now some thirty-one in number. The only year that administration was on foot when there was no meeting of the Committee of Inspection was 2001. It was not unusual - indeed it was the norm – for there to be more than one meeting in a year, and in 1994 there were thirteen meetings. The complexity of the affairs which the Committee was expected to consider was considerable. The work which would have been involved in a diligent attending to duties would have been not only attendance at meetings, but also considering the various papers which were proposed to be discussed at the meetings of creditors.

10 There have been some resolutions which are relevant to this application. On 8 August 1994 the Committee of Inspection, with the two members in question abstaining, passed a resolution authorising the liquidator to pay a maximum of $10,000 each to the two committee members, and to obtain any Court approval which might have been needed as a pre-requisite to the making of the payment.

11 The application which is now before me is one which was filed as long ago as 9 December 1999. It sought leave to give the two members a gift of $12,000 each, or such other order as the Court thought fit. The application has been adjourned from time to time, as it became apparent that the work involved in the liquidation was still continuing.

12 On 10 December 1999 a meeting of the Committee of Inspection was informed of the filing of the application. The Chairman gave special thanks to the two members for their attendances over a period of almost ten years.

13 At a further meeting on 18 November 2004, the Committee passed (with the two relevant shareholders’ representatives abstaining) a motion supporting the liquidator's application to this Court for a direction authorising him to make the gift.

14 More recently, at a meeting of the Committee held on 25 October 2005, one of the creditor Committee members said that he supported the making of a gift of $18,000 to each of the shareholder members, while another said that he supported only the making of a gift in the amount of $10,000, which had been approved some eleven years before.

15 The liquidation is now nearing its end, and hence this application has been brought on for hearing. The situation in the liquidation is that shareholders will receive nothing, and unsecured creditors will not receive anything like one hundred cents in the dollar.

16 The liquidator is of the view that having regard to what he describes as the exceptional services rendered by these two shareholders representatives and their performance of those services with distinction, a gift of $18,000 each is appropriate. He says:

“This view is inspired by my gratitude for their special services volunteered and not through any moral obligation to pay for those services.”

17 I am comfortably satisfied that this is an appropriate occasion to exercise the jurisdiction under s 435. I have also come to the view that I should accept the liquidator's estimate of the worth of the services of the two members. Liquidators are in a position where they have an almost uniquely good insight into the worth of various kinds of services which are provided in business. The Court is accustomed to placing great weight on liquidators views about such matters. The creditor who supports a payment of only $10,000 each is aware of today's proceedings, but has not appeared. The effect of making the payments totalling $36,000 on the distributions to unsecured creditors is that those creditors will receive 0.04 cents in the dollar less than they would have received if there had been no such distribution. That indicates, in my view, that the effect on the creditors of paying the $36,000 will not be great. The effect on the creditors of paying them $18,000 each rather than the $10,000 each which was approved in 1994 is even smaller.

18 It is appropriate to make the orders sought.

19 I make orders in accordance with short minutes of order which I initial and date today's date and place with the papers.

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