Re New Tel Ltd (in liq)

[2004] FCA 1154

FEDERAL COURT OF AUSTRALIA

Wainter Pty Ltd, in the matter of New Tel Limited (in liq) [2004] FCA 1154

CORPORATIONS – creditors’ voluntary winding up - subsequent Court order for winding up - examinations – written notice of examination to creditors – whether orders should be made stating what is ‘reasonably practicable’ in respect of identifying creditors – source of power for such order considered – effect of Court order considered – consideration of what is reasonably practicable in the circumstances

Corporations Act 2001 (Cth) ss 435A, 446A, 447A, 508, 596A, 596B, 596E, 1322
Federal Court of Australia Act 1976 (Cth) s 21

Ansett Australia Ltd (No 1), Re (2002) 115 FCR 376 cited
Ansett Australia Ltd (No 2), Re (2002) 115 FCR 395 cited
Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 cited
Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661 cited
Centaur Mining & Exploration Ltd (in liq) (rec and mgr appted), Re (2003) 48 ACSR 1 cited
Gibbons v LibertyOne Ltd (in liq) (2002) 41 ACSR 442 considered
Love, Re (as Liquidator of ACN 0077 368 257 Ltd) (2003) 44 ACSR 367 cited
NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174 considered
One.Tel Ltd, Re; Walker and Sherman (as liquidators) (2002) 43 ACSR 305 cited
Selim v McGrath (2003) 47 ACSR 537 cited

IN THE MATTER OF NEW TEL LIMITED (IN LIQUIDATION)

THE APPLICATION OF WAINTER PTY LTD
W35 of 2004

RD NICHOLSON J
6 SEPTEMBER 2004
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W35 OF 2004

IN THE MATTER OF NEW TEL LIMITED (IN LIQUIDATION) ACN 009 068 955
AND:	THE APPLICATION OF WAINTER PTY LTD ACN 008 725 586 PLAINTIFF
JUDGE:	RD NICHOLSON J
DATE OF ORDER:	6 SEPTEMBER 2004
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.The application for an order in terms of par 4 of the originating process dated 12 February 2004 be refused.

2.There be no order as to costs.

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W35 OF 2004

IN THE MATTER OF NEW TEL LIMITED (IN LIQUIDATION) ACN 009 068 955
AND:	THE APPLICATION OF WAINTER PTY LTD ACN 008 725 586 PLAINTIFF

JUDGE:	RD NICHOLSON J
DATE:	6 SEPTEMBER 2004
PLACE:	PERTH

REASONS FOR JUDGMENT

1. In its originating process in respect of an application under s 596A and s 596B of the Corporations Act 2001 (Cth) (‘the Corporations Act’), the plaintiff seeks an order with respect to service of notices of examination upon creditors. Section 596E of the Corporations Act provides that ‘if the Court summons a person for examination, the person who applied for the summons must give written notice of the examination to: (a) as many of the corporation’s creditors as reasonably practicable…’. The order sought is that the requirement upon the plaintiff pursuant to that paragraph be varied so as to require the plaintiff to give notice of proposed examinations to the liquidator of New Tel Limited (‘New Tel’), Mr Gregory Winfield Hall of PriceWaterhouseCoopers, together with a request that the liquidator convey such notice to the creditors in such manner as the liquidator see fit.

2. The evidence relevant to consideration of this application derives from facts deposed to in affidavits by solicitors for the plaintiff, Messrs Blundell and Stork.  In summary they depose to the fact that the plaintiff and its solicitors know nothing of the creditors beyond the very limited information provided in the liquidator’s report to creditors and related documents; the liquidator himself does not know who all the creditors are; and the creditors are likely to be extensive and spread across Australia.  There is evidence that there are approximately 3000 potential creditors of New Tel and that finalising the draft list of current creditors would cost approximately $2000. 

   CORPORATIONS ACT SECTION 447A

3. Written submissions for the applicant seek to rely on three sources of power for the Court to make an order that the requirements of s 596E(a) will be satisfied in the manner proposed. The first is by placing reliance on s 447A of the Corporations Act. That section reads:

   ‘447A

   (1)The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.

   (2)For example, if the Court is satisfied that the administration of a company should end:

   (a)because the company is solvent; or

   (b)because provisions of this Part are being abused; and

   (c)for some other reason;

   the Court may order under subsection (1) that the administration is to end.

   (3)An order may be made subject to conditions.

   (4)An order may be made on the application of:

   (a)the company; or

   (b)a creditor of the company; or

   (c)in the case of a company under administration – the administrator of the company; or

   (d)in the case of a company that has executed a deed of company arrangement – the deed’s administrator; or

   (e)ASIC; or

   (f)any other interested person.’

4. The application is brought ex parte by the plaintiff who is the entity which has obtained the order pursuant to s 596A and s 596B for examination of certain persons. I consider the plaintiff is indisputably an interested person within the compass of s 447A(4)(f).

5. The circumstances pertaining to New Tel are as follows. A liquidator was appointed on 13 January 2003 pursuant to a deemed creditors’ voluntary winding up following a voluntary administration: s 446A of the Corporations Act. On 4 March 2003 the Supreme Court of New South Wales appointed a liquidator, pursuant to a court-ordered winding up: Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661.

6. The plaintiff submits that it has now been repeatedly recognised that a deemed voluntary winding up under s 446A continues under Pt 5.3A of the Corporations Act and that s 447A continues to apply throughout the deemed voluntary winding up: Gibbons v LibertyOne Ltd (in liq) (2002) 41 ACSR 442 at 452, at [50] (Austin J); Re One.Tel Ltd; Walker and Sherman (as liquidators) (2002) 43 ACSR 305 at 317, at [50]; at 318, at [56] (Barrett J); Re Love (as Liquidator of ACN 0077 368 257 Ltd) (2003) 44 ACSR 367 at 369 – 370, at [70] (Barrett J) and Re Centaur Mining & Exploration Ltd (in liq) (rec and mgr appted) (2003) 48 ACSR 1 at 3, at [8] (Merkel J). Those decisions all rely on and apply the High Court judgment in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. It is submitted that s 447A is in the broadest terms and has been interpreted broadly: Australasian Memory at 281 –282, at [24]. The plaintiff says s 447A has been applied to dispense with the requirements and notices in other circumstances: Re Ansett Australia Ltd (No 2) (2002) 115 FCR 395. Additionally it is argued there is a particular reason to apply s 447A in this case; namely, s 446A(3) deems s 447 to have been complied with and, but for this deeming provision, a list of creditors would have been sent to the plaintiff as a consequence of the application of s 497(2)(b)(ii).

7. The starting point for s 447A is that the orders must have a nexus with how Pt 5.3A is to operate in relation to a particular company. The extension of the operation of that section in the abovementioned authorities to orders in respect of meetings required to be held under s 508 is not a recognition of an extension of the power in s 447A generally beyond Pt 5.3A. It is an extension only because of the nexus with the provisions of Pt 5.3A.

8. That Part addresses ‘administration of a company’s affairs with a view to executing a deed of company arrangement’. Division 1 sets out, in s 435A, the object of the Part which is:

   ‘435A  The object of this Part is to provide for business, property and affairs of an insolvent company to be administered in a way that:

   (a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or

   (b)if it is not possible for the company or its business to continue in existence – results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.’

   The Divisions of Pt 5.3A address subjects germane to that object.

9. Section 508 appears in Pt 5.5, which is the Part addressing voluntary winding up. Section 508 is in Pt 5.5 Div 4 and sets out the duty of a liquidator to convene an annual meeting of creditors. Section 497 is in Pt 5.5 Div 3 titled ‘Creditors’ voluntary winding up’.

10. Section 596A and s 596B are contained in Pt 5.9, a Part dealing with miscellaneous matters. They appear in Div 1 which addresses the issue of examining a person about a corporation.

11. The ratio in Gibbons for exercising the power under s 447A in relation to the holding of a general meeting under s 508(1)(b) was as follows. Section 446A provides a mechanism for the administration under a deed of company arrangement to fit into the creditors’ voluntary winding up regime by qualifying the way in which Pt 5.5 applies in certain respects. The deeming provisions in s 446A having ‘borrowed’ provisions in Pt 5.5, it was found to be open under s 447A to qualify the extent to which the deeming provision in Pt 5.3A operated. (See Gibbons at 451 – 452, at [48] – [50])

12. The effect of s 446A(3) in relation to s 497(2)(b) is that it is deemed the company has sent to each creditor with the notice convening a meeting a list of all creditors with other requisite details. That deemed effect, thus incorporated into Pt 5.3A, is concerned with the convening of the meeting of creditors. It has no wider deeming effect; it says nothing concerning written notice of examination.

13. Further, there is no apparent nexus between s 596A and s 596B and Div 1 of Pt 5.9 and the provisions of Pt 5.3A. Section 508 finds its point of nexus with Pt 5.3A as a consequence of the deeming by s 446A(3) which provides that s 497 is taken to have been complied with in relation to a winding up. There is no such apparent inter-contextual connection between the provisions of Div 1 of Pt 5.9 and those of Pt 5.3A. The provisions providing for examination of a corporation are of general application and are not on their terms related to the issues addressed in Pt 5.3A (ie the administration of a company’s affairs with a view to executing a deed of company arrangement or to the object of that Part as expressed in s 435A).

14. There is a further issue here in any event. New Tel, having initially been placed in liquidation by a creditors’ voluntary winding up, is now in liquidation by a court order. Such order was made pursuant to Pt 5.4. Therefore the requisite nexus with Pt 5.3A is not present. Section 447A can only affect how Pt 5.3A operates. None of the authorities relied on by the plaintiff extend applicability of s 447A beyond matters arising under Pt 5.3A.

15. Therefore I do not consider that the statutory language as accepted in the abovementioned cases allows the power in s 447A to be utilised to vary the requirement specified in s 596E(a).

    CORPORATIONS ACT SECTION 1322(4)

16. The second source of jurisdiction relied on by the plaintiff is s 1322(4) of the Corporations Act. That subsection reads:

    ‘1322(4)         Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:

    (a)an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Act or a provision of the constitution of a corporation;

    (b)an order directing the rectification of any register kept by ASIC under this Act;

    (c)an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);

    (d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;

    and may make such consequential or ancillary orders as the Court thinks fit.’

    The application of the subsection is also to be understood in terms of the two following subsections, which read as follows:

    ‘1322(5)         An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.

    1322(6)          The Court must not make an order under this section unless it is satisfied:

    (a)in the case of an order referred to in paragraph (4)(a);

    (i)that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;

    (ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or

    (iii)that it is just and equitable that the order be made; and

    (b)in the case of an order referred to in paragraph (4)(c) – that the person subject to the civil liability concerned acted honestly; and

    (c)in every case – that no substantial injustice has been or is likely to be caused to any person.’

17. It is submitted that s 1322(4) is not limited to making an order retrospectively validating a regularity: see, for example, NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174 in which Santow J made prospective orders under s 1322(4) extending time to convene a meeting. It is further submitted that the language of the subsection is sufficiently broad to allow an order which had the effect of avoiding an irregularity occurring and that this would encompass a declaration that non-compliance with s 596E(a) does not invalidate the examination summonses issued.

18. Turning to the paragraphs of s 1322(4), there is no appropriate foundation for making an order under par (a) when no act, matter or thing to which it refers has been done, instituted or taken. That is not to say than an order cannot be made under s 1322(4) in respect of a future matter because par (d) expressly recognises the instance of an extension of the period of the doing of any act, matter or thing. It was within that category that the circumstances in NRMA Insurance Group Ltd v Spragg fell. Here, there is no period for extension pursuant to s 596E(a). What is sought is a variation of the terms of the section.

    DECLARATORY RELIEF

19. The third source of jurisdiction relied upon for the plaintiff is s 21 of the Federal Court of Australia Act 1976 (Cth). This is the Court’s power to make a declaration. It is said that the Court may make a declaration that the plaintiff, has in the circumstances deposed to in the evidence, given written notice to ‘as many of the corporation’s creditors as reasonably practicable’.

20. Whether or not it may in the future be appropriate for this Court to exercise its power pursuant to s 21 of the Federal Court of Australia Act is not a matter which at this time requires consideration.  The submissions in writing appear to appreciate that a declaration in the exercise of that power could only be made in respect of a written notice that has been given. 

    REASONABLE PRACTICABILITY

21. I am therefore of the opinion that none of the three sources of power sought to be relied upon by the plaintiff for the variation can be relied upon in the present circumstances.

22. However, I return to the terms of s 596E(a). The words ‘as reasonably practicable’ require examination of what is able to be so categorised on the evidence before the Court. It appears from the evidence before the Court that the liquidator is prepared to make available an incomplete list of creditors, being the initial list of creditors provided by the directors, and also to provide a list of creditors representing over 75 per cent in value of creditors’ claims. For the liquidator to finalise a full and current list of creditors he requires payment of a sum of $2000, to which request the plaintiff has not acceded. The liquidator also wishes to await the outcome of applications made in respect of the examinations summonses before making appropriate arrangements.

23. There is not presently before the Court any affidavit of means concerning the plaintiff and in particular as to its ability or inability to meet the cost of $2000 for the preparation of a complete list of creditors. 

24. It is for the plaintiff to determine what is ‘reasonably practicable’ and what will stand up to scrutiny as satisfying that requirement should subsequent scrutiny become necessary or appropriate.  It is therefore for the plaintiff to decide whether or not it wishes to meet the cost of $2000 to have the complete list of creditors prepared.  If the reasonable practicability of the written notice of the examination was called into question, the plaintiff would be required to show that it was not reasonably practicable for it to meet the cost of finalising the full and current list of creditors.  It must decide whether, in such circumstance, it has presently made the appropriate decision when it decided not to meet that cost. 

25. It is apparent that at the minimum the plaintiff is able to give written notice pursuant to s 596E to the creditors named in the initial list provided by the directors, crosschecked with the list of creditors representing over 75 per cent in value of creditor’ claims.

26. In these circumstances it is not readily apparent, even if appropriate power existed, why the Court should order a modified operation of s 596E(a) in the manner sought by the plaintiff. It is for the plaintiff to take the responsibility of deciding whether the steps it takes in that regard are reasonably practicable in the circumstances. Guidance from the law is available to the plaintiff from the reasoning in Re Ansett Australia Ltd (No 1) (2002) 115 FCR 376 and Selim v McGrath (2003) 47 ACSR 537.

27. Accordingly I consider that the application for an order in terms of par 4 of the originating process should be refused. 

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Associate:

Dated:            6 September 2004

Counsel for the Plaintiff:	JC Giles
Solicitor for the Plaintiff:	Solomon Brothers
Date of Hearing:	19 April 2004
Date of Judgment:	6 September 2004