SUPREME COURT OF QUEENSLAND
CITATION:
Re Octaviar Ltd [2020] QSC 353
PARTIES: In BS 10123 of 2020:
OCTAVIAR LIMITED (IN LIQUIDATION)
ACN 107 863 436
(first applicant)
DAVID JOHN KERR IN HIS CAPACITY AS SPECIAL PURPOSE LIQUIDATOR OF OCTAVIAR LIMITED ACN 107 863 436 (IN LIQUIDATION)
(second applicant)
In BS 10133 of 2020:
OCTAVIAR LIMITED (IN LIQUIDATION)
ACN 107 863 436
(first applicant)
OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION)
ACN 101 069 390
(second applicant)
WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET AS JOINT AND SEVERAL LIQUIDATORS OF OCTAVIAR LIMITED ACN 107 863 436 (IN LIQUIDATION) AND AS JOINT AND SEVERAL LIQUIDATORS OF OCTAVIAR ADMINISTRATION PTY LTD ACN 101 069 390 (IN LIQUIDATION)
(third applicant)
FILE NO/S: BS 10123 of 2020
BS 10133 of 2020
DIVISION:
Trial Division
PROCEEDING:
Originating Application
DELIVERED ON:
26 November 2020
DELIVERED AT:
Brisbane
HEARING DATE:
13 October 2020
JUDGE:
Bond J
ORDER:
The orders of the Court are as follows.
In BS 10123 of 2020:
1. Pursuant to section 90-15 of the Insolvency Practice Schedule, the second applicant is justified in entering into the settlement deed appearing at Tab 1 of Exhibit DJK1 to the affidavit of David John Kerr filed by leave on 13 October 2020.
2. The applicants’ costs of this application be costs in the winding up of, and paid out of the assets of, the first applicant.
3. Order 2 of the orders made on 13 October 2020 be extended until 7 days after judgment is published in respect of the application of the Commissioner of Taxation notified to the Court by email to the Associate to Bond J on 23 October 2020.
4. The parties will be heard in relation to the further directions which should be made in relation to that application.
In BS 10133 of 2020:
1. Pursuant to section 90-15 of the Insolvency Practice Schedule, the third applicants are justified in –
(a) entering into the settlement deed appearing at Tab 1 of Exhibit WJF-2 to the confidential second affidavit of William John Fletcher filed by leave on 13 October 2020; and
(b) causing the first and second applicants to enter into that deed.
2. The applicants’ costs of this application be costs in the winding up of, and paid out of the assets of, each of the first and second applicants, with each company to bear 50% of those costs.
3. Order 3 of the orders made on 13 October 2020 be extended until 7 days after judgment is published in respect of the applications of the Commissioner of Taxation and of the third applicants notified to the Court by emails to the Associate to Bond J on 23 October 2020.
4. The parties will be heard in relation to the further directions which should be made in relation to those applications.
CATCHWORDS:
CORPORATIONS – WINDING UP – CONDUCTS AND INCIDENTS OF WINDING UP – APPLICATIONS TO COURT FOR DIRECTIONS OR ADVICE – where the liquidators in two related liquidations applied for judicial…
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- AGLC
- Re Octaviar Ltd [2020] QSC 353
- Case
- [2020] QSC 353
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the court was whether the liquidators should be advised that they are justified in entering into the settlement deed. This involved interpreting section 90-15 of the Insolvency Practice Schedule, which empowers the court to make orders in relation to the external administration of a company, including determining any question arising in such administration. The court also needed to consider the principles governing the exercise of this discretion, including the role of the liquidators, the interests of creditors, and the need to avoid unnecessary costs and delays. The liquidators argued that the settlement deed would expedite the resolution of the companies' liabilities and allow for a more efficient distribution of assets.
In deciding the matter, the court first noted that the liquidators were "officers" of the companies within the meaning of the Corporations Act and thus eligible to apply for the court's directions under section 90-20(1)(d). The court then summarised the principles for exercising discretion under section 90-15, which include facilitating the liquidators' functions, providing guidance on legal matters, and avoiding interference unless there are substantial grounds for doubting the prudence of the liquidators' conduct. The court emphasised that the directions do not bind third parties or determine substantive matters in dispute. After considering the support from the committees of inspection and the potential benefits of resolving the companies' liabilities, the court found that the liquidators were justified in entering into the settlement deed. The court concluded that the settlement deed would expedite the resolution of the companies' liabilities and allow for a more efficient distribution of assets, thereby benefiting the creditors.
The court granted the liquidators' applications, advising them that they were justified in entering into and causing the companies to enter into the settlement deed. The court also ordered that the liquidators' costs be paid from the companies' assets. The court further extended certain existing orders to accommodate pending applications from the Commissioner of Taxation and other parties. Finally, the court scheduled further hearings to address additional directions that should be made regarding those pending applications.
Orders
Orders of the court
The orders of the Court are as follows.
In BS 10123 of 2020:
1. Pursuant to section 90-15 of the Insolvency Practice Schedule, the second applicant is justified in entering into the settlement deed appearing at Tab 1 of Exhibit DJK1 to the affidavit of David John Kerr filed by leave on 13 October 2020.
2. The applicants’ costs of this application be costs in the winding up of, and paid out of the assets of, the first applicant.
3. Order 2 of the orders made on 13 October 2020 be extended until 7 days after judgment is published in respect of the application of the Commissioner of Taxation notified to the Court by email to the Associate to Bond J on 23 October 2020.
4. The parties will be heard in relation to the further directions which should be made in relation to that application.
In BS 10133 of 2020:
1. Pursuant to section 90-15 of the Insolvency Practice Schedule, the third applicants are justified in –
(a) entering into the settlement deed appearing at Tab 1 of Exhibit WJF-2 to the confidential second affidavit of William John Fletcher filed by leave on 13 October 2020; and
(b) causing the first and second applicants to enter into that deed.
2. The applicants’ costs of this application be costs in the winding up of, and paid out of the assets of, each of the first and second applicants, with each company to bear 50% of those costs.
3. Order 3 of the orders made on 13 October 2020 be extended until 7 days after judgment is published in respect of the applications of the Commissioner of Taxation and of the third applicants notified to the Court by emails to the Associate to Bond J on 23 October 2020.
4. The parties will be heard in relation to the further directions which should be made in relation to those applications.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Section 90-15 of the Insolvency Practice Schedule relevantly provides:90-15Court may make orders in relation to external administrationCourt may make orders(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.Orders on own initiative or on application(2) The Court may exercise the power under subsection (1):(a) on its own initiative, during proceedings before the Court; or(b) on application under section 90-20.Examples of orders that may be made(3) Without limiting subsection (1), those orders may include any one or more of the following:(a) an order determining any question arising in the external administration of the company; … The GPLs and the SPL here apply under s 90-20(1)(d), which permits an “officer of the company” to apply for orders under s 90-15. Section 9 of the Corporations Act defines “officer” to include a liquidator. Subject to one caveat, the legal principles applicable to the exercise of my discretion on the present applications are those recently summarised by White J in Re Lewis (2020) 145 ACSR 459 at [30] to [31]: [30] The principles applied by the courts in the exercise of the power under cl 90-15 are, in effect, the same as those which were applied in the exercise of the power under the former s 479(3) (in the case [of] a court-ordered winding up) or under s 511 (in the case of a voluntary winding up) of the Act: Re McGrath ((in their capacity as liquidators and scheme administrators of HIH Casualty and General Insurance Ltd (in liq and subject to schemes of arrangement)) (2018) 133 ACSR 338; [2018] NSWSC 1886 at [4]–[5]; Re Warner (in his capacity as liquidator of Sakr Bros Pty Ltd (in liq)) [2019] FCA 547 at [18]. In Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481, Gleeson JA noted at [8], that the power under cl 90-15 to “make such orders as it thinks fit in relation to the external administration of a company” (cl 90-15(1)), including “an order determining any question arising in the external administration of the company” (cl 90-15(3)(a)), is wider than s 479(3) and accommodates the determination of substantive rights. His Honour noted that the Court would not make a determination of substantive rights without affording potentially affected parties an opportunity to be heard: ibid.[31] The established principles indicate:(a) the power to give directions is intended to facilitate the performance of the liquidator’s functions and should be interpreted widely to give effect to that intention: Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 … at [9];(b) the power is available to give a liquidator advice as to the proper course of action to be taken in the liquidation: Re Bell [[2009] WASC 235] at [47]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [7];(c) the Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will usually not do so when the subject of the directions sought relates to the making and implementation of a business or commercial decision and when there is no particular legal issue raised and no attack on the [propriety] or reasonableness of the decision: Re MF Global [[2012] NSWSC 994] at [7];(d) the Court does not interfere with or seek to second guess the liquidator’s judgment unless there is evidence of a lack of good faith, an error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator’s conduct or when the Court considers that the liquidator’s decision is not a proper and reasonable one: Re One.Tel [(2014) 99 ACSR 247] at [36]; Re Bell [[2009] WASC 235] at [31], [47] and [50]; Re Octaviar [[2017] NSWSC 1556] at [10];(e) the effect of a direction is to sanction a course of conduct on the part of the liquidators so that, providing full disclosure has been made to the Court, the liquidator may adopt the course free from the risk of personal liability for breach of duty: Re Bell [[2009] WASC 235] at [47]; Re One.Tel [(2014) 99 ACSR 247] at [32]; and(f) the directions do not bind third parties, and do not determine substantive matters in dispute between the liquidator and third parties: Re Bell [[2009] WASC 235] at [47].