Simplot Australia Pty Ltd (ACN 070 579 609) v Foodlife Inventory Holdings Pty Ltd (Receiver appointed) (ACN 078 176 717), in the matter of Foodlife Inventory Holdings Pty Ltd (Receiver appointed) (ACN 078 176 717)
[2002] FCA 1085
•26 AUGUST 2002
FEDERAL COURT OF AUSTRALIA
Simplot Australia Pty Ltd (ACN 070 579 609) v Foodlife Inventory Holdings Pty Ltd (Receiver appointed) (ACN 078 176 717), in the matter of Foodlife Inventory Holdings Pty Ltd (Receiver appointed) (ACN 078 176 717) [2002] FCA 1085
CORPORATIONS – appointment of provisional liquidator pursuant to s 472(2) of the Corporations Act 2001 (Cth) – where administrator and receiver appointed – where company insolvent – where company not a trading entity – whether interests of unsecured creditors better served by continuation of administration or appointment of provisional liquidator.
Corporations Act 2001 (Cth): ss 440A(3), 472(2)
IN THE MATTER OF FOODLIFE INVENTORY HOLDINGS PTY LTD (RECEIVER APPOINTED) (ACN 078 176 717)
SIMPLOT AUSTRALIA PTY LTD (ACN 070 579 609) and FOODLIFE INVENTORY HOLDINGS PTY LTD (Receiver appointed) (ACN 078 176 717)
V 3154 of 2002
GOLDBERG J
26 AUGUST 2002
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 3154 of 2002
IN THE MATTER OF FOODLIFE INVENTORY HOLDINGS PTY LTD (RECEIVER APPOINTED) (ACN 078 176 717)
BETWEEN:
SIMPLOT AUSTRALIA PTY LTD
(ACN 070 579 609)
PlaintiffAND:
FOODLIFE INVENTORY HOLDINGS PTY LTD
(Receiver appointed)
(ACN 078 176 717)
DefendantJUDGE:
GOLDBERG J
DATE OF ORDER:
26 AUGUST 2002
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.Pursuant to s 440D, the plaintiff have leave to commence this proceeding against the defendant.
2.Glenn Crisp of Hall Chadwick, Level 9, 459 Collins Street, Melbourne be appointed provisional liquidator of Foodlife Inventory Holdings Pty Ltd (Receiver appointed) (ACN 078 176 717).
3. The provisional liquidator have the following powers:
(a)subject to s 477(2A) of the Corporations Act 2001 (Cth), compromise any calls, liabilities to calls, debts, liabilities capable of resulting in debts and any claims (present or future, certain or contingent, ascertained or sounding only in damages) subsisting or supposed to subsist between the company and a contributory or other debtor of person apprehending liability to the company, and all questions in any way relating to or affecting the property or the winding up of the company, on such terms as are agreed, and take any security for the discharge of, and given a complete discharge in respect of, any such call, debt, liability or claim;
(b)bring or defend any legal proceeding in the name and on behalf of the company;
(c) appoint a solicitor to assist him in his duties;
(d)do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents and for that purpose use when necessary the seal of the company;
(e)subject to the Bankruptcy Act 1966 (Cth), provide in the bankruptcy of any contributory or debtor of the company or under any deed executed under that Act;
(f)draw, accept, make and endorse any bill or exchange or promissory note in the name and on behalf of the company;
(g)obtain credit, whether on the security of the property of the company or otherwise;
(h)take out letters of administration of the estate of a deceased contributory or debtor, and do any other act necessary for obtaining payment of any money due from any contributory or debtor, or his or her estate, that cannot be conveniently done in the name of the company; and
(i)appoint an agent to do any business that the liquidator is unable to do or that it is unreasonable to expect the liquidator to do in person.
4. There be liberty to apply on 24 hours notice.
5. The costs of this application be reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 3154 of 2002
IN THE MATTER OF FOODLIFE INVENTORY HOLDINGS PTY LTD (RECEIVER APPOINTED) (ACN 078 176 717)
BETWEEN:
SIMPLOT AUSTRALIA PTY LTD
(ACN 070 579 609)
PlaintiffAND:
FOODLIFE INVENTORY HOLDINGS PTY LTD
(Receiver appointed)
(ACN 078 176 717)
Defendant
JUDGE:
GOLDBERG J
DATE:
26 AUGUST 2002
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On 21 August 2002 an application was filed on behalf of the plaintiff who claims to be a creditor of the defendant, Foodlife Inventory Holdings Pty Ltd (Receiver appointed) (“the company”) to wind up the company pursuant to the provisions of s 459P of the Corporations Act 2001 (Cth) (“the Act”). At the same time and on the same day, an application was filed pursuant to s 472(2) of the Act seeking the appointment of Mr Bruno Secatore of Bentleys MRI as provisional liquidator of the company. These reasons deal with the application for the appointment of a provisional liquidator only.
The company’s business has been to act as an intermediary for a number of restaurant chains for the purchase of products for them from food suppliers. The company was involved in the business of food distribution and logistics and supplied various foods and beverages to restaurants and fast-food chains.
In November 2001 a debenture charge was registered in favour of Demancon Pty Ltd on the basis that it had made a number of payments to the Westpac Banking Corporation in repayment of moneys due to the bank by the company. The amounts paid total in excess of $7 million.
On 21 July 2002 the company ceased trading and on 22 July 2002 its business was sold to Mayne Logistics Pty Ltd pursuant to an agreement apparently dated 24 July 2002. I say “apparently dated” because that agreement has not been placed in evidence before me and I only know of its existence as a result of matters deposed to by various witnesses.
On 25 July 2002 the company notified suppliers that an external accounting firm had been retained to collect debts due to the company and to process accounts payable by it. A number of affidavits have been filed by creditors and it appears from that material that a number of creditors were told by the accountants that they would be paid in full within a relatively short space of time.
On 13 August 2002 a receiver was appointed to the assets and undertaking of the company by Demancon Pty Ltd. One of the directors of Demancon Pty Ltd is the sole director of the company.
On 22 August 2002 an administrator of the company was appointed by the company pursuant to the provisions of Pt 5.3A of the Act. The first meeting of creditors pursuant to s 436E of the Act is to be held in three days’ time on 29 August 2002 in accordance with the provisions of Pt 5.3A of the Act. A considerable number of unsecured creditors of the company have been identified. It appears from the material that, according to the plaintiff company and its supporting creditors, of the order of $6 million of debts due to creditors have been identified. According to the administrator, the value of debts of unsecured creditors appears to be of the order of up to $12 million. It also appears from that material that the number of unsecured creditors is of the order of three hundred.
The plaintiff has proposed Mr Secatore of Bentleys MRI as provisional liquidator of the company but it appears that persons who were either members or employees of the same firm were auditors of the company between 1998 and 2000 and that either partners in, or employees of, that firm were also consultants to the company between February and June 2002.
The power to appoint a provisional liquidator is found in s 472(2) of the Act which provides that:
“The Court may appoint an official liquidator provisionally at any time after the filing of a winding up application and before the making of a winding up order or, if there is an appeal against a winding up order, before a decision in the appeal is made.”
As an administrator of the company was appointed on 22 August, s 440A(3) of the Act becomes relevant. That sub‑section provides:
“The Court is not to appoint a provisional liquidator of a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than have a provisional liquidator appointed.”
I have had appearances before me on behalf of the plaintiff, the receiver, the administrator and the sole director of the company. The receiver does not oppose the appointment of the provisional liquidator. The administrator, consistently with his position of supporting his appointment, seeks an adjournment of the application to enable the creditors at the creditors’ meeting to consider the matter and vote, as they are entitled to do under the Act, to continue with his appointment or the appointment of another administrator. The sole director of the company, Mr John Thomas, opposes the appointment of a provisional liquidator and in substance has submitted that an administrator is in a position to look after and protect the interests of unsecured creditors and should be in a position to consider the propounding of a deed of company arrangement consistently with the objects of Pt 5.3A of the Act.
Counsel for Mr Thomas has offered an undertaking that the company of which the sole director is one of the directors, Demancon Pty Ltd, will not seek disbursement of funds received from the company without five business days’ notice to the plaintiff. It was submitted that if the undertaking proffered was accepted, the status quo of the company would be preserved and that there would accordingly be no prejudice to the unsecured creditors of the company by adjourning the matter to allow the administration to continue.
There are two matters that arise for consideration. One is whether the issues which give rise to the application to appoint a provisional liquidator are such that the threshold has been crossed, whereby it is appropriate for the Court to appoint a provisional liquidator. I accept that the burden is upon the plaintiff to establish that that threshold has been crossed. If I reach that conclusion, the second matter is whether the sole director of the company has satisfied me, in accordance with s 440A(3) of the Act, that it is in the interests of the company’s creditors for the company to continue under administration rather than have a provisional liquidator appointed.
As I have noted earlier, the application is supported by a number of creditors, including substantial creditors of the order of the value of $3.9 to $4 million. I am satisfied on the material that the company is insolvent in the sense that its insolvency is presumed by virtue of the provisions of s 459C(2)(c) because of the appointment of the receiver and s 436A(1) because of the circumstances relating to the appointment of the administrator.
I am satisfied on the material before me that a real issue has arisen as to the preservation of the company’s assets and the protection of the interests of the unsecured creditors. The receiver was appointed by a company that has an association with the director of the company. It seems to me that it is appropriate in the circumstances that have arisen that there be an independent person available to control and supervise the collection of the assets of the company, being the debts due to it and their disbursement.
I am not at this stage casting any aspersions on the receiver, or the company which appointed the receiver, or the sole director, other than to say that it is desirable in the circumstances that have arisen to avoid any potential conflict that there be an independent supervision of the collection of those debts. The undertaking which has been offered on behalf of the company which appointed the receiver in my view is insufficient to protect the interests of the unsecured creditors, particularly having regard to the fact that it appears from the material that a number of assets, debts due to the company, have been collected already and disbursed. I consider it desirable that an immediate opportunity be given to a person independent of the secured creditor to investigate the situation relating to the debts due to, and the debts payable by, the company.
On the material before me, it appears that a winding up of the company is inevitable. Although an administrator has been appointed and although the object of Pt 5.3A of the Act under which the administrator has been appointed is to provide that:
“the 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,”
I place particular emphasis on the fact that the company has apparently sold the whole of its undertaking to Mayne Logistics Pty Ltd. On that basis, it seems to me that all that is left of the company so far as any business of it is concerned is the collection of debts due to it and the payment of debts owed by it. I also take into account the fact that on the material before me, it does not appear that the creditors - certainly the unsecured creditors - of the company were forewarned of the sale and transfer of the business to Mayne Logistics Pty Ltd on 22 July pursuant to the agreement made on 24 July.
I am satisfied on the material before me, for the reasons to which I have referred, that it is appropriate to appoint a provisional liquidator of the company.
I turn then to s 440A(3) which, as I have noted earlier, directs that I should not appoint a provisional liquidator, even if the company is under administration, if I am satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than have a provisional liquidator appointed. For the reasons to which I have referred, I am not so satisfied. The burden of so satisfying me was on the party seeking to have the administration continue, which in substance was the sole director of the company. Having regard to the fact that the whole of the undertaking of the business of the company has been sold, it is difficult to see how it can be said that it is in the interests of the company’s creditors for the company to continue under administration. Even allowing for the fact that a deed of company arrangement can be propounded and executed by the company under Pt 5.3A of the Act, it is difficult to see how the deed of company arrangement would do anything other than provide for the collection of the debts due to the company and the payment of the debts due by it.
It was suggested in argument that a deed of company arrangement can provide for the contribution of funds by third parties and for entitlements to payments of debts due by the company to be waived. As a matter of principle that is obviously so. Whether that situation may apply in this case is simply a matter of speculation. There has been no suggestion or submission put to me by any of the parties appearing before the Court that funds will or might be contributed by any person or that a waiver of any particular entitlement, particularly an entitlement of any of the secured creditors or the particular secured creditor who appointed the receiver to be paid will eventuate.
Although the material before me has been limited, there is no real evidence of any basis upon which it might be said that an administration might continue in a way that is to the advantage, or in the interests of, creditors.
Accordingly, I am satisfied that I should appoint a provisional liquidator to the company. In the circumstances that appointment is desirable. Having regard to the provisions of s 532(2)(c)(iv) of the Act, I should not appoint the person who was proposed by the plaintiff in the interlocutory application that has been made.
I will hear the parties as to the appointment of a substitute provisional liquidator and I will also hear the parties as to the powers which should be given to the provisional liquidator.
I certify that the preceding twenty‑three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. Associate:
Dated: 3 September 2002
Counsel for the Plaintiff: R Saunders Solicitor for the Plaintiff: Mills Oakley Lawyers Pty Ltd Counsel for the Receiver: A Hanak Solicitor for the Receiver: Abbott Stillman and Wilson Counsel for the Administrator: S V Palmer Solicitor for the Administrator: Deacons Counsel for John James Thomas: M O’Bryan Solicitor for John James Thomas: Robert James Date of Hearing: 26 August 2002 Date of Judgment: 26 August 2002
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