Workers Compensation Nominal Insurer v Denny Earthmoving & Bulk Haulage Pty Ltd

[2008] NSWSC 1167

CITATION:	Workers Compensation Nominal Insurer v Denny Earthmoving & Bulk Haulage Pty Ltd [2008] NSWSC 1167
HEARING DATE(S):	03/11/08
JUDGMENT DATE :	3 November 2008
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	3 November 2008
DECISION:	Proceedings adjourned for making of orders
CATCHWORDS:	CORPORATIONS - winding up - choice of liquidator - where voluntary administrator in office - his firm in Canberra had previously been the company's accountants - liquidator nominated by plaintiff based in Sydney but company based in Canberra - the court will appoint a liquidator to be nominated by the plaintiff who is based in Canberra
LEGISLATION CITED:	Corporations Act 2001 (Cth), Part 5.3A, s 440
CATEGORY:	Principal judgment
CASES CITED:	Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230 Unifor Office Systems Australia Pty Ltd v Brewer Partnership Pty Ltd [1999] NSWSC 137
PARTIES:	Workers Compensation Nominal Insurer - Plaintiff Denny Earthmoving & Bulk Haulage Pty Ltd - Defendant
FILE NUMBER(S):	SC 5012/08
COUNSEL:	Mr J Van Leer, Solicitor - Plaintiff Mr E Oliveri, Solicitor - Defendant Mr J. Oliver, Solicitor - Administrator
SOLICITORS:	Craddock Murray Neumann - Plaintiff Oliveri Lawyers - Defendant Meyer Vandenberg Lawyers

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

BARRETT J

MONDAY 3 NOVEMBER 2008

5012/08 WORKERS COMPENSATION NOMINAL INSURER v DENNY EARTHMOVING & BULK HAULAGE PTY LTD

JUDGMENT

1 The plaintiff seeks an order for the winding up of the defendant in insolvency and an order appointing a liquidator. The originating process was filed on 1 October 2008. Thereafter, on 26 October 2008, the sole director of the defendant resolved to appoint an administrator under Part 5.3A of the Corporations Act 2001 (Cth). Mr Lo Pilato became the administrator on that day.

2 Upon the plaintiff's winding up application coming before the court today, there was no opposition to the making of a winding up order and no suggestion that s 440A requires adjournment. It is accepted on all hands that the company is insolvent.

3 There is, however, a dispute about who should be appointed liquidator.

4 The plaintiff presses for the appointment of Mr Nicholls, whose consent to act was filed with the winding up application. The defendant, at the behest of the administrator, Mr Lo Pilato, takes the position that Mr Lo Pilato himself should be appointed. Mr Oliveri, solicitor, appeared for the sole director of the defendant to support the position taken by the defendant.

5 The plaintiff's objection to Mr Lo Pilato stems from the fact that the defendant's registered office is and has always been at the Canberra office of Mr Lo Pilato's firm and until some four years ago Mr Lo Pilato's firm had acted as the defendant's accountants.

6 The evidence is said to suggest that the defendant has been insolvent since at least 2006 and has been in default in payment of certain employee entitlements since at least 2000. There is an apprehension that that default and the solvency position before 2006 may be matters on which persons in Mr Lo Pilato's firm may ultimately be able to shed some light.

7 These are matters which a liquidator might, in the ordinary course, be expected to have to examine.

8 Mr Lo Pilato's position is that he has obtained significant insights in the affairs of the defendant and has established a relationship of mutual respect with the sole director, although it appears that all this is said on the basis of only two meetings between them in the space of less than a week since 26 October 2008. Mr Lo Pilato sees himself as well placed to begin as liquidator from a position of advantage, whereas he says that, if someone else were appointed, there would be duplication and a relationship will have to be created anew. Mr Lo Pilato makes it clear that he himself had nothing to do with the defendant's work when his firm was retained as its accountants.

9 Another relevant point is that the operations of the defendant, which is a haulage and earth moving company, are based in Canberra and the sole director lives in Canberra. Mr Lo Pilato's practice is in Canberra while Mr Nicholls' practice is in Sydney. Mr Nicholls deposes that he will have no difficulty in attending to matters in Canberra, as needed, if he is appointed.

10 Three guiding principles come into play here. First, liquidators must be independent and have the appearance of independence so that the Court must judge, in the words of Santow J in Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230:

“... whether there would be a reasonable apprehension by any creditor of lack of impartiality on the liquidator's part in the circumstances, by reason of prior association with the company or those associated with it, including creditors or indeed any other circumstances".

11 Second, there is the matter referred to by Hodgson J in Unifor Office Systems Australia Pty Ltd v Brewer Partnership Pty Ltd [1999] NSWSC 137:

“This Court, in winding up proceedings, has acted on a general principle that liquidators should not be chosen by the directors or other principals of the company. It is considered to be in the interests of creditors that someone entirely independent undertake that role. …”

12 Third, there is the obvious point that, all other things being equal, the court will select an option that is likely to involve less cost.

13 Balancing these matters, I am of the opinion that Mr Lo Pilato should not be appointed. The connection with his firm and the possibility that a liquidator will have to enquire into matters going back as far as 2000 when his firm was active as the company’s accountants poses potential problems in relation to the first principle. Mr Lo Pilato's position is also called into question by the second principle. I discount the familiarity he says he has obtained through two meetings, bearing in mind that the result of his work as administrator will be available to whoever it is that is appointed liquidator.

14 The sole director's desire to see Mr Lo Pilato appointed, even to the point of having a solicitor appear today to argue for that result, is noteworthy.

15 It is far preferable that a liquidator other than Mr Lo Pilato be appointed.

16 Mr Nicholls is suitable, subject to one thing which goes to the third principle, that is, that he is in Sydney and the activities of the company and the residence of the sole director in Canberra. I note that Mr Nicholls says that he is able to attend to matters in Canberra as needed. Needless to say, that would be at some additional cost.

17 I have decided that the court should appoint a liquidator nominated by the plaintiff in the normal way but that that liquidator should be someone who practises in Canberra.

18 I will therefore adjourn the matter to enable the plaintiff to bring in the consent of a liquidator practising in Canberra.

[Discussion on timing]

19 I will stand the proceedings over to 2 o'clock tomorrow and I will make the winding up order in the order appointing the liquidator at that point.

[Submissions on costs]

20 When the matter comes back before me I shall make the usual order that the defendant company pay the plaintiff’s costs of the proceedings.

**********