Willow Court Retirement Village Pty Ltd v Australian Securities and Investments Commission

[2007] NSWSC 76

CITATION:	Willow Court Retirement Village Pty Ltd v ASIC [2007] NSWSC 76
HEARING DATE(S):	12/02/07
JUDGMENT DATE :	12 February 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	12 February 2007
DECISION:	Order directing reinstatement of registration of company. Orders for winding up and appointment of liquidator.
CATCHWORDS:	CORPORATIONS - reinstatement of registration - immediate winding up - appointment as liquidator of person who is already liquidator of associated company seeking reinstatement and winding up
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.461(1)(k), 467(3)(b), 601AH(2)
CASES CITED:	Australian Securities and Investments Commission v Westpoint Corporation Pty Ltd (2006) 227 ALR 623 Re Chilia Properties Pty Ltd (1997) 73 FLR 171
PARTIES:	Willow Court Retirement Village Pty Limited (in liquidation) by its liquidator, Michael John Morris Smith - Plaintiff Australian Secuirities and Investments Commission - Defendant
FILE NUMBER(S):	SC 6022/06
COUNSEL:	Mr R.A. Lyne, Solicitor - Plaintiff
SOLICITORS:	Dibbs Abbott Stillman - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

MONDAY 12 FEBRUARY 2007

6022/06 WILLOW COURT RETIREMENT VILLAGE PTY LTD (IN LIQUIDATION) v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

JUDGMENT

1 Willow Court Retirement Village Pty Ltd (“Willow Court”) is in liquidation in consequence of orders made by this Court. In the present proceeding, it applies under s.601AH(2) of the Corporations Act 2001 (Cth) for an order that ASIC reinstate the registration of JTS Property & Investments Pty Ltd (“JTS”). Willow Court also seeks winding up of JTS.

2 The evidence shows that JTS was, while it existed, an associated company of Willow Court, in the sense that each was controlled by the same person and both were involved in enterprises undertaken by that person. The evidence further shows that two payments were made by Willow Court to JTS in the first half of 2004. These together amounted to some $211,000.

3 Furthermore, those moneys appear to have been applied by JTS in or towards the acquisition of certain land in Tasmania. Part of that land has been sold, but at the time of deregistration of JTS the remainder continued to be recorded in the Tasmanian Torrens title register in the name of JTS.

4 Mr Smith, the liquidator of Willow Court, refers to all these matters in his affidavit. He has not, it appears, been able to ascertain the nature of the payments by Willow Court to JTS, but clearly has in mind the possibility that the circumstances in which the payments were made caused Willow Court to obtain an equitable interest in the land to which I have referred. And if the payments were, in reality, loans, the remaining land represents an asset to which resort might be had to obtain satisfaction.

5 It is in those circumstances that Willow Court, at the instigation of Mr Smith as liquidator, seeks to have the registration of JTS reinstated. Willow Court also seeks the immediate winding up of JTS.

6 As to the reinstatement application, search materials show that JTS was deregistered because of non-lodgment of returns. There was thus no conscious decision that it had come to the end of its useful life.

7 In the circumstances to which I have referred, concerning the payments and the land, it is clear that Willow Court has an interest going beyond that of a mere bystander in the question of whether the registration of JTS is reinstated. Willow Court has a distinct interest in pursuing JTS in respect of the payments and possibly the land. Willow Court is, accordingly, a “person aggrieved” by the deregistration, as contemplated by s.601AH(2)(a)(i).

8 The next question posed by the section, therefore, is whether it is “just” that the registration be reinstated (see s.601AH(2)(b)). The circumstances to which I have referred show that reinstatement is “just”, in that, unless JTS comes back into existence, Willow Court will be unable to pursue its claims in respect of the payments and any claims it may have to the land.

9 There is then the question of winding up. The sole director of JTS has made it clear to Mr Smith that she has no interest in resuming stewardship of JTS. The group of which Willow Tree and JTS were part is largely under external administration. In those circumstances, JTS is devoid of management and should also be placed under appropriate external administration. The case is within the just and equitable ground provided by s.461(1)(k). Bearing in mind the payments, Willow Court should be regarded as a creditor with the necessary standing.

10 I make the following orders:

1. Order that Australian Securities and Investments Commission reinstate the registration of JTS Property & Investments Pty Ltd.

2. Order that, in respect of the plaintiff's application for a winding up order in respect of JTS Property & Investments Pty Ltd, all notifications and steps required but not taken be dispensed with pursuant to s.467(3)(b) of the Corporations Act.

3. Order that, forthwith upon reinstatement of the registration of JTS Property & Investments Pty Ltd, that company be wound up.

4. Order that, forthwith upon reinstatement of the registration of JTS Property & Investments Pty Ltd, Mr Michael John Morris Smith, of level 4, 88 Phillip Street, Parramatta, be appointed liquidator of that company.

11 I should add two things. First, the application as been notified to ASIC, which does not oppose it. Second, I have appointed Mr Smith as liquidator of JTS, even though he is also already liquidator of Willow Court. The circumstances to which I have referred throw up the possibility of future conflict between the interests of Willow Court and the interests of JTS, as regards the payments and the land. That, of itself, is not a reason to decline to appoint Mr Smith. It is common practice – and generally conducive to efficiency – to appoint the same person as liquidator of several related or associated companies unless some good reason to the contrary can be seen. I refer to the following observation of Lehane J in Re Chilia Properties Pty Ltd (1997) 73 FLR 171 at p.173:

“… it is well established that in the absence of any real, as opposed to theoretical, conflict of interest it is generally desirable that the external administration of a group of companies should be placed in the hands of one administrator.”

12 In Australian Securities and Investments Commission v Westpoint Corporation Pty Ltd (2006) 227 ALR 623 at p.629, Siopis J said:

“[32] … I agree that the observations made by Lehane J in Chilia , referred to above, state the principles to be applied in this case. The principles are also reflected in the following observations by Hoffmann J (as he then was) in Re Arrows Ltd [1992] BCC 121, which were cited with approval by Warren J in Sisu Capital (at 123):
‘… It is by no means uncommon in the case of the insolvency of a substantial group of companies for cross-claims and conflicts of interest to arise between companies within the group. That does not usually deflect the court from appointing a single firm of insolvency practitioners in the first instance to deal with the whole insolvency of the group, leaving the question of potential conflict of interests to be dealt with if and when it arises.’

[33] I accept the arguments advanced by Mr Colvin SC and Mr Thomson that in the situation where there is no obvious and real conflict but there is a possibility of a theoretical conflict, a court should not thereby be inhibited from appointing a single set of liquidators when that would advance the efficiency of the liquidation and result in fewer fees being charged in respect of the liquidation.”

13 I have no doubt that Mr Smith, as he pursues his duties in respect of the two companies, will be alive to the possibility that conflicting interests may make it inappropriate or impossible for him to continue in the two roles. Immediately any such situation arises or appears likely to arise, it would be expected that Mr Smith would make an appropriate approach to the court.

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