FEDERAL COURT OF AUSTRALIA Simpson, in the matter of CT Partners Australia Pty Ltd v CT Partners Australia Pty Ltd [2015] FCA 776 Citation: Simpson, in the matter of CT Partners Australia Pty Ltd v CT Partners Australia Pty Ltd [2015] FCA 776 Parties: COLIN JOHN BOYD SIMPSON and TOPSIM PTY LTD (ACN 075 083 886) v CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837) File number(s): WAD 324 of 2015 Judge(s): SIOPIS J Date of judgment: 2 July 2015 Catchwords: CORPORATIONS – application for the appointment of a provisional liquidator – company is an Australian subsidiary of a United States of America corporation – whether evidence of sufficient probative weight that directors are likely to act in breach of fiduciary duty. Date of hearing: 30 June 2015 and 2 July 2015 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 11 Counsel for the Plaintiffs: Mr K Christensen Solicitor for the Plaintiffs: Gadens Lawyers Counsel for the Defendant: The Defendant did not appear. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 324 of 2015 IN THE MATTER OF CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837) BETWEEN: COLIN JOHN BOYD SIMPSON First Plaintiff TOPSIM PTY LTD (ACN 075 083 886) Second Plaintiff AND: CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837) Defendant JUDGE: SIOPIS J DATE OF ORDER: 2 JULY 2015 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The plaintiffs' interlocutory application dated 30 June 2015 is dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 324 of 2015 IN THE MATTER OF CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837) BETWEEN: COLIN JOHN BOYD SIMPSON First Plaintiff TOPSIM PTY LTD (ACN 075 083 886) Second Plaintiff AND: CT PARTNERS AUSTRALIA PTY LTD (ACN 167 523 837) Defendant JUDGE: SIOPIS J DATE: 2 JULY 2015 PLACE: PERTH REASONS FOR JUDGMENT 1 This is an interlocutory application, commenced ex parte, for the appointment of a provisional liquidator to a company, CT Partners Australia Pty Ltd (the company), which is an Australian subsidiary of an American company, CT Partners Executive Search Inc. The application is brought by Mr Colin Simpson and Topsim Pty Ltd, a company related to Mr Simpson, who claim to be creditors of the company. 2 The plaintiffs' claims against the company arise from the following circumstances. The plaintiffs entered into an agreement with the company whereby they sold their shares in an existing Australian company, Park Brown International Pty Limited, to the company. Following the sale of the shares, the first plaintiff became an employee of the company, as did his partner, Ms Debra Cozart. The plaintiffs claim that they are owed considerable sums of money by way of outstanding instalments in respect of the unpaid purchase price of the shares. Also, Mr Simpson claims that there are outstanding employee entitlements due to him from the company. 3 This application is brought because the American parent company has entered into an agreement whereby the American parent company agreed to sell some of its worldwide assets and undertaking to another company, DHR International Inc. As a consequence, the American parent company recently advised all employees of the company in Australia including Mr Simpson that the company's operations in Australia were to cease with effect from 30 June 2015 and that the employment of Mr Simpson and the other employees of the company was to terminate on that date. 4 There is no question that the plaintiffs, on the basis of their claims to be creditors, have sufficient standing as plaintiffs to bring this application. 5 The plaintiffs apply for the appointment of a provisional liquidator because they contend that the assets of the company are at risk of dissipation. The assets in question comprise the monies in the company's bank account. The plaintiffs say that each of the three directors of the company is resident in the United States of America and the company's bank account is operated by persons who are not resident in Australia. There is evidence that there have been occasions in the past when the directors have, to use the words of Mr Christensen, who appeared for the plaintiffs, "swept" the company's bank account and appropriated the monies to the American parent company. 6 Mr Christensen has argued that there is a risk that the directors resident in the United States will do the same thing with the monies currently in the company's bank account and thereby put the monies out of the reach of any liquidator who may subsequently be appointed to the company, to the prejudice of the plaintiffs in respect of their claims against the company for unpaid employee entitlements and other debts. The basis of the claim made by the plaintiffs is that there is a threatened breach of fiduciary duty by the American directors of the company which would result in the assets of the company being put out of the reach of a liquidator of the Australian subsidiary. 7 That is a serious allegation for the plaintiffs to make. The appointment of a provisional liquidator is a major intrusion into the conduct of the company's affairs and the Court would be slow to make such an appointment in response to an allegation that the assets of the company are at risk because of a threatened breach of fiduciary duty, in the absence of a strong case on the evidence in support of that allegation. This is particularly the case where, as here, there is no contradictor. However, in my view, the evidence relied upon by the plaintiffs comes nowhere near satisfying that standard. 8 In fact, the evidence of telephone conversations with the American director of the company and the representative of the American parent company relied on by the plaintiffs, show that whilst each acknowledged that he was not familiar with Australian law on liquidations, each was prepared to comply with that law once each was advised as to its contents. There was no suggestion that each intended to deal with the company's funds as alleged by the plaintiffs. 9 So whilst it appears that the affairs of the company are at the moment in a somewhat unsatisfactory state in the sense that the American parent company does not yet appear to be taking any action in order to deal with the legal consequences of the company's business operations coming to an end and the outstanding employee entitlements, this does not comprise a basis upon which to infer that there is an imminent risk that the directors will act in breach of their fiduciary duties to the company. 10 In order for the plaintiffs to succeed they needed to put forward a strong case of a threatened breach of fiduciary duties. They have failed to do so. 11 I therefore dismiss this application. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate Dated: 29 July 2015