Travel World Travel Service Pty Ltd v Rose Grisbrook Pty Ltd (under administration)
[1996] FCA 792
•4 SEPTEMBER 1996
CATCHWORDS
CORPORATIONS - Winding up - Statutory demand - Non compliance - Winding up application - Administrator appointed - Administrator seeks adjournment of application pending meeting of creditors - Whether in interests of company's creditors for company to remain under administration rather than be wound up.
Corporations Law s 440A(2)
TRAVEL WORLD TRAVEL SERVICE PTY LTD (ACN 005 402 942) v ROSE GRISBROOK PTY LTD (ACN 005 292 884) (under administration) VG 3338 of 1996
COURT:Sundberg J
PLACE:Melbourne
DATE:4 September 1996
IN THE FEDERAL COURT OF AUSTRALIA )
VICTORIA DISTRICT REGISTRY ) No VG 3338 of 1996
GENERAL DIVISION )
BETWEEN:TRAVEL WORLD TRAVEL SERVICE PTY LTD
(ACN 005 402 942)
Applicant
AND:ROSE GRISBROOK PTY LTD
(ACN 005 292 884) (under administration)
Respondent
COURT:Sundberg J
DATE:4 September 1996
PLACE:Melbourne
MINUTES OF ORDER
The Court orders that:
The respondent be wound up under the provisions of the Corporations Law.
Michael Humphris of 360 Elizabeth Street Melbourne, an official liquidator, be appointed liquidator of the respondent.
The applicant's costs, including any reserved costs, be taxed and reimbursed out of the property of the respondent in accordance with s 466(2) of the Law.
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 ) No VG 3338 of 1996
GENERAL DIVISION )
BETWEEN:TRAVEL WORLD TRAVEL SERVICE PTY LTD
(ACN 005 402 942)
Applicant
AND:ROSE GRISBROOK PTY LTD
(ACN 005 292 884) (under administration)
Respondent
COURT:Sundberg J
DATE:4 September 1996
PLACE:Melbourne
REASONS FOR JUDGMENT
SUNDBERG J:
On or about 18 March 1996 the applicant served on the respondent a statutory demand under s 459E of the Corporations Law requiring payment of the sum of $71,304.24. The respondent did not comply with the demand, and on 3 July the applicant applied for an order that the respondent be wound up.
On 13 August 1996 Colin Raymond McDonald gave notice of his intention to appear on the hearing of the application and to oppose it on the ground that he had been appointed administrator of the respondent on the previous day with a view to calling a meeting of creditors to consider whether the respondent should execute a deed of company arrangement or be wound up. In the notice Mr McDonald expressed the view that it would be in the
interests of all the creditors of the company to adjourn the application until after the second meeting of creditors had been held pursuant to s 439A.
Section 440A(2) provides:
The Court is to adjourn the hearing of an application for an order to wind up 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 be wound up.
In his first affidavit in support of the application for adjournment Mr McDonald states that on the basis of his discussion with a director of the respondent, Mr David Grisbrook, and his investigations so far, he is of the opinion that the placement of the company under administration should result in a better return for the company's creditors and members than would result from an immediate winding up. He adds: "In any event, I consider that the creditors' prospects for payment will not be worsened by the appointment ... of an administrator".
Further information as to why creditors would be better off under an administration than on a winding up was later provided in the affidavit of Nicholas Giasoumi, who is assisting Mr McDonald in the administration. The information in this affidavit is best assimilated if presented in point form:
(a)The total sum due to creditors is $370,562.18.
(b)The respondent's only activity is as trustee of the Grisbrook Family Trust.
(c)The respondent's assets consist of "loans at call" of $175,420.53, and half the units in a unit trust which owns land in South Yarra valued at $250,000 but subject to a mortgage securing a loan of $150,000. The loans are not presently recoverable and are the subject of litigation.
(d)The sum available to creditors on a winding up will be about $25,000 (ie the value of the units [$50,000] less various costs and commissions).
(e)On the above scenario creditors will receive approximately 6 to 7 cents in the dollar on a winding up.
(f)Under a proposed deed of company arrangement, the costs of administration will be met by Mr Grisbrook, related creditors totalling $289,257.94 will not participate in any distribution, unrelated creditors will receive 30 per cent of the benefit (if any) arising from units in another unit trust if and when distributed, and a cash contribution of $15,000 will be made by Mr Grisbrook.
(g)On the scenario in (f), creditors could expect a return of about 15 cents in the dollar. This estimate assumes the "loans at call", and the "benefit" referred in (f), are worthless.
In a second affidavit sworn by Mr McDonald he expresses the view that the respondent is insolvent, and that the amount owed to beneficiaries of the Family Trust (part of the total sum due to creditors) is an actual liability of the respondent provable in a liquidation. The amount owed to beneficiaries is $234,649.21, which is about 63 per cent of the total amount due.
On that material the respondent submitted that the "interests of creditors" requirement in s 440A(2) has been satisfied.
The respondent has not satisfied me that it is in the interests of its creditors that it continue under administration rather than be wound up. My reasons are as follows:
(a)The applicant is the only truly independent creditor who is to participate in a distribution under the deed. As at 19 August 1996 it was owed $92,188.79. The applicant is opposed to the continuation of the administration. The respondent's solicitors ($10,000) are the only other creditor not directly related to the respondent or the Grisbrook family. The applicant is the preponderant independent creditor, and is presumably the best judge of its own interests.
(b)There is a real question whether the $194,257 owed to Mr Grisbrook, one of the Trust beneficiaries, is a debt owed to him in his capacity as a member of the respondent within s 563A. If so, the debt is postponed until all debts owed to other persons have been satisfied. If the debt is postponed, the other debts owing by the respondent would total $197,189.73. The respondent, on which the onus under s 440A(2) lies, has produced no evidence showing on what account and in what capacity Mr Grisbrook is owed the money.
(c)The amount distributable under the proposed deed does not include the value of the units in the Family Trust. This asset would be available to creditors on a winding up.
(d)If the Grisbrook debt is postponed, and the value of the units is included at $25,000, the amount available to creditors on a winding up would be in the order of 13 cents in the dollar. Mr Giasoumi estimates that on an administration creditors would receive approximately 15 cents in the dollar assuming the amount owing to the applicant is $71,304.24. As at 19 August 1996 the amount owing was $92,188.79, and on my arithmetic creditors are likely to receive between 11 and 12 cents in the dollar on an administration.
While none of these factors, standing alone, may be decisive, in combination they leave me unsatisfied that it is in the interests of the respondent's creditors that the company continue under administration rather than be wound up.
The Court orders that the respondent be wound up under the provisions of the Corporations Law, that Michael Humphris of 360 Elizabeth Street Melbourne, an official liquidator, be appointed liquidator, and that the applicant's costs, including reserved costs, if any, be taxed and reimbursed out of the property of the respondent in accordance with s 466(2) of the Law.
I certify that this and the preceding four pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg
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Associate
4 September 1996
Counsel for the Applicant: S A Glacken
Solicitors for the Applicant: Coltmans Price Brent
The respondent was represented by I G Sinclair of Winneke Sinclair solicitors.
Date of Hearing: 28 August 1996
Place of Hearing: Melbourne
Date of Judgment: 4 September 1996
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