Remiliotis, J. v Tenth Anemot P/L (In Liquidation)

[1994] FCA 392

393J 4 ~ t

JUDGMENT No. ..... , .......

Jll THE FED- COURT OF AUSTRALIA

DIVISIQN

B E T W E E N :

JIM REMILIOTQ - . -

Applicant

A N D :

Respondent

D:  NORTHROP J

EdsE: MELBOURNE

RUE:  31 May 1994

ONS FOR JUDGMENZ

This application, brought by Jim Remiliotis as

is dated 2 June 1993. It is an application in the winding up

proceedings in this Court which were commenced in 1992 in
matter VG 3368 of 1992. Those proceedings were based upon an
application under 8460 of the Corporations Law as then in
operation, which provided that the Court may order the winding

Court under the provisions of the Corporations Law;

up of a company that is unable to pay its debts. That section
has since been repealed and other legislation replacing it

enacted.

By an order made on 15 February 1993, a deputy district

registrar of the Court ordered:

"1. That Tenth Anemot Pty Limited be wound up by this

2.	That Alan Murray Horsburgh of Duesburys, Level 12, 555 Lonsdale Street, Melbourne, an official liquidator, be appointed the liquidator of the affairs of the said company;
3 .	That the applicant's costs be taxed and reimbursed in accordance with ss466(2) of the Corporations Law (the applicant being Brambles Australia Limited); and

4. That the costs of the supporting creditor, Nine Network Pty Limited, be taxed and reimbursed in accordance with ss466(2) of the Corporations Law."

There is no doubt that the company, Tenth Anemot Pty

Limited, is completely insolvent at the moment. The company apparently has only $8 paid up capital as appears from a judgment given by McDonald J in Supreme Court proceedings which will be referred to shortly, but there is no material

before this Court as to the structure of the company, the

number of shareholders, the method by which it carried on its
business and financed its business, or any matters of that
kind.

Apparently, it commenced conducting a reception centre in

Huntingdale Road, Mount Waverley, in about 1987. On about 27
January 1992, a fire destroyed those premises. Apparently,
the land on which the building was erected was owned by a
related company which appears to be in liquidation also. As a
result of the fire, it is said that all the records of the
company have been destroyed. The information supplied to the
liquidator by the directors of the company is extremely
limited and basically says that they have no records. As a
result, the liquidator has been unable to take over any assets
of the company whatsoever. It has no assets in hand by which
the liquidator is able to investigate the affairs of the
company properly or fully, and there is no suggestion that any
company or any person has offered to indemnify the liquidator
in any such investigations.

Before the winding up order was made in this matter, the

company had commenced legal proceedings in the Supreme Court
of Victoria against the insurance company with which it had a
policy of insurance with respect to its property and business
at Mount Waverley. The insurance company is defending that
action and has made a cross-claim against the company. It is

not necessary for me to express any views about that action

except to say that the Supreme Court of Victoria, constituted

by McDonald J, refused to order Tenth Anemot Pty Ltd to give
security for costs in favour of the insurance company in those
proceedings. Those proceedings apparently are ready for
trial, but once the winding up order was made the affairs of
the company, including this claim in the Supreme Court, came

under the control of the liquidator.

The persons behind the company in liquidation, Tenth

Anemot Pty Ltd, apparently have not been prepared to indemnify the liquidator in relation to any examination of the claim by the company against the insurance company to determine whether the liquidator should continue the prosecution of the claim in

the Supreme Court. It is also quite clear that the persons

behind the company Tenth Anemot Pty Limited are not prepared
to give any indemnity at this stage to the liquidator to
prosecute the claim and to indemnify the liquidator for any
costs the liquidator may be ordered to pay to the insurance
company if the claim fails. It is not disputed that the only
asset the company has is its interest in this action in the
Supreme Court, which is ready for trial.

In these circumstances, the applicant, who claims to be a contributory of the company, makes this application under s482 of the Corporations Law. That section provides:

"At any time during the winding up of a company, the

Court may, on the application of the liquidator or of a

creditor or contributory, make an order staying the

winding up either indefinitely or for a limited time or

terminating the winding up on a day specified in the

order. "

In many respects this provision is similar to provisions

contained in the Bankruptcy Act relating to annulments of
bankruptcy. There have been a number of authorities referred
to during the course of argument as to how the Court should
approach an application under this section, which confers a
discretion on the Court. I do not propose to refer in detail
to all the cases to which I have been referred, but reference
may be made to some of them, including Re Krextile Holdings
Pty Ltd v Widdows; Brush Fabrics Pty Ltd 119741 VR 689, a
judgment of Gillard J, where his Honour at 694 referred to the
general principles to be applied in cases of this type, and to
the judgment of Buckley J in Re Telescriptor Syndicate Ltd

[l90312 Ch 174. Other cases referred to were Re Mascot Home

Furnishers Pty Ltd [l9701 VR 593; Collins v G. Collins and
Sons Pty Ltd (1984)Z ACLC 575, a judgment of McLellann J of
the Supreme Court of New South Wales, as well as a reference
to McPherson on Companies, chapter 15 and in particular page
444-5 and Re Denistone Real Estate Pty Ltd and Companies Act

(1970)3 NSWR 327 and in particular what was said by Street J

at 330. Other authorities were mentioned to which I do not

propose to refer.

The general principles appear to be clear, in that the

Court must have regard to the attitude of the creditors and

also to questions of what might be called the commercial
morality of the company concerned. Most of the cases refer to
facts where the company proposes either to be reconstructed,
for instance through a capital reconstruction, or to continue

trading, and questions arise as to whether the creditors have

been paid in full or have agreed to the proposal. The view of

the liquidator is taken into account and whether in all the
circumstances it is fair that the stay, or bringing to an end
of the winding up, is appropriate. The position is stated in
fairly clear language, and very stark language, by Street J in

Denistone Real Estate Pty L td and the Companies Act at 330 and

I quote:

"Speaking generally, the staying o f proceedings i n a winding up i n a situation where a company i s clearly insolvent i s not consistent with the due preservation o f

the policy o f the legislation and o f the l a w that, i n the

public interest , an insolvent company ought t o be wound

up. I t i s not for the Court t o take the in i t ia t i ve o f

launching in to the community- a s the applicant would have
me do i n t h i s case- an insolvent company i n anticipation
that i t w i l l i n due course trade i t s e l f out o f i t s
insolvency. I see no valid analogy with the
discretionary granting t o an insolvent company o f the

indulgence o f an adjournment o f a winding up petition so

a s t o afford it a chance t o save i t s e l f from being wound

up. "

This is consistent with the views expressed by Master

Lee, as he then was, in the Supreme Court of Queensland in the

caee of Re Warbler Pty Ltd (1982)l ACLC 323 at 328.

With that background, I turn to the particular facts of

this caee. It was argued on behalf of the applicant that the

facts of this case are unique in that all that is being sought
is the capacity for certain people, presumably being those
behind the company, to provide funds to enable that company in
its own name to prosecute its claim against the insurance
company on the basis that, if it does succeed and the amount
claimed is said to be over $2.5 million, the company would be
in a position to pay out the creditors of the company, the
total amount of the debts being said to be something over $1
million. This is in circumstances where the company has no
assets whatsoever except possibly for its claim in the Supreme
Court proceedings and where the application for security for
costs has been refused. Although it is said that this is not
an order seeking to enable the company to continue to trade,
it does let out into the community a company which is
completely insolvent. Undertakings were offered as to how the
money, if any, recovered in the Supreme Court proceedings was
to be dealt with, but this itself gives rise to very nice
questions where the company is insolvent. In my opinion, the
Court should not allow a company, even in this limited area,
which is obviously insolvent, out into the community even to
pursue a limited claim of the kind specified.

Such a course would be completely against the principles

of the Corporations Law in this regard and the Court should

play no part in it. This is so particularly where the Court

..

suspects that there has not been a full disclosure by the

applicant of the affairs of the company. I mentioned earlier

the absence of any information as to the structure of the
company, a company which has been carried on solely by means
of, in substance, borrowed money where there is a very small
paid up capital. There has, apparently, been no co-operation

by the directors of the company with the liquidator.

The liquidator has incurred costs and expenses of something
over $7000. Two creditors have appeared to oppose the
granting of the application. It is said that one other
company with some security over the affairs of the company has
indicated a willingness to go along with the proposal. But at
the moment there is nothing, really, which can be looked to in
satisfaction of that security. If the company does succeed,
nice questions might arise as to whether that company would
get a preference over other creditors. In all the
circumstances, the Court should not grant the application.

Accordingly the application is refused.

I do not propose to make any order as to the change of

the name of the applicant. When enforcing any order against
the applicant, he could be referred to by both names- the

application in the name of Jim Remiliotis, also known as

Roumeliotis. I see no problem there at all. In each

application before the Court today I will make an order that
the applicant pay the costs of the liquidator and of the
creditors who appeared, including reserved costs, such costs

to be taxed.

These applications have finally been disposed with,

therefore the costs can be taxed immediately. There is no
problem there. As far as any other proceedings which might be
brought, I express no views as to those and the costs of
those.
I certify that this and the preceding 8 pages are a true copy

of the ex tempore reasons of judgment of Northrop J

Signed	X
Date:	1 7 m I q 9 $

JUDGES' CHAMBERS
FEDERAL COURT OF AUSTRALIA
450 LITTLE BOURKE STREET

MELBOURNE, 3000

16 June 1994

MS Sonia Cornale
Records Clerk
Library and Information Semices
Principal Registry
Federal Court of Australia
Level 16
Law Courts Building
Queens Square

SYDNEY NSW 2000

Dear Sonia

Re: Com~uterized Leaal Information Retrieval Svstem

I enclose the following judgment for inclusion in the data base of Federal Court Judgments:

Jim Remiliotis v Tent h Anemot Ptv Ltd (In Liauidation)
No VG 3368 of 1992

The word processing disk containing the above judgment is enclosed. Please return the disk to me when appropriate.

Thank you

ecretary to

The Hon Mr Justice Northrop