Federal Court of Australia Australian Securities and Investments Commission v SA Services & PW Pty Ltd [2021] FCA 302 File number: VID 783 of 2020 Judgment of: ANASTASSIOU J Date of judgment: 30 March 2021 Catchwords: CORPORATIONS – application for winding up order pursuant to s 461(1)(a) of the Corporations Act 2001 (Cth), appointment of liquidators pursuant to s 477(1) of the Act and reimbursement of costs pursuant to s 466(2) of the Act – where companies had resolved by special resolution that they be wound up by the Court – whether any reason not to exercise discretion to wind up companies – application granted Legislation: Corporations Act 2001 (Cth), ss 461(1)(a), 466(2), 477(1), 491 Cases cited: Australian Securities and Investments Commission v Dawson [2020] FCA 1144 Griffin Energy Group Pty Ltd v Griffin Windfarm Holdings Pty Ltd, in the matter of Griffin Energy Group Pty Ltd (subject to Deed of Company Arrangement) [2012] FCA 197 Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371; 205 FLR 450 Kala Capital Pty Ltd [2011] NSWSC 1253 MFS Alternative Assets (in liquidation) v Angstrom Assets Pty Limited [2012] NSWSC 447 Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 11 Date of last submission: 24 February 2021 Date of hearing: 23 February 2021 Counsel for the Applicant: Ms C. Van Proctor Solicitor for the Applicant: Australian Securities and Investments Commission ORDERS VID 783 of 2020 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: SA SERVICES & PW PTY LTD First Respondent ORPHANS ASIA PTY LTD Second Respondent order made by: ANASTASSIOU J DATE OF ORDER: 30 MARCH 2021 THE COURT ORDERS THAT: 1. Pursuant to section 461(1)(a) of the Corporations Act 2001 (Cth) (Corporations Act), the First and Second Defendants be wound up on the ground that both companies have by special resolution resolved to be wound up by the Court. 2. Michael John Hill and Anthony Norman Connelly (Liquidators), being registered liquidators of McGrathNicol, be appointed as joint and several liquidators of the First and Second Defendants. 3. The Liquidators be appointed liquidators of the First and Second Defendants with all the powers of a liquidator pursuant to s 477 of the Act in respect of the property of the First and Second Defendants. 4. The Applicant's costs of and incidental to the winding up application be costs in the winding up of the First and Second Defendants (taxed or as agreed) and reimbursed in accordance with section 466(2) of the Corporations Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT ANASTASSIOU J: Introduction 1 On 4 November 2020 and 30 November 2020 respectively, SA Services & PW Pty Ltd and Orphans Asia Pty Ltd (the First and Second Defendants) resolved by special resolution to appoint liquidators pursuant to s 461(1)(a) of the Corporations Act 2001 (Cth). 2 Accordingly, by originating process dated 8 December 2020, the Australian Securities and Investments Commission (ASIC) seeks an order for the winding up of the First and Second Defendants pursuant to s 461(1)(a) of the Act. In support of the application, ASIC relies on the affidavit of Melisande Guanlao dated 8 December 2020 (the Guanlao Affidavit). 3 ASIC also seeks orders that Michael John Hill (Mr Hill) and Anthony Norman Connelly (Mr Connelly), being registered liquidators of McGrathNicol, be appointed as joint and several liquidators of the First and Second Defendants, with all the powers of a liquidator pursuant to s 477 of the Act in respect of the property of the First and Second Defendants. In this regard, ASIC filed notices of consent from Mr Hill and Mr Connelly to act as liquidators of the First and Second Defendants. 4 Further, ASIC seeks an order that its costs of and incidental to the winding up application be costs in the winding up of the First and Second Defendants (taxed or as agreed) and reimbursed in accordance with s 466(2) of the Act. 5 The Defendants have not opposed the orders sought by ASIC. Consideration 6 Section 461(1)(a) of the Act provides that the Court may order the winding up of a company if the company has by special resolution resolved that it be wound up by the Court. In Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371; 205 FLR 450 at [35], Barrett J observed that: Although judicial discussion of s.461(1)(a) and equivalent provisions has been limited, it seems to me that three principles should be regarded as relevant to a case in which winding up is sought on the ground that the company has by special resolution resolved that it be wound up by the court. First, the body of shareholders has a statutory right to decide that their company should be wound up by the court, being a right exercisable by whatever procedures are sufficient, in the particular circumstances, to cause a special resolution to be passed. Second, the court has discretion whether or not to make a winding up order (being the discretion created by the word "may" at the start of s.461(1)) but the discretion should not be exercised against the making of the order unless the shareholders' decision, or some aspect of the surrounding circumstances, involves something unconscionable or inequitable (or some special consideration adversely affecting creditors indicates that there should be no winding up). Third, the availability to the shareholders of the alternative of initiating voluntary winding up by special resolution does not represent any reason for declining to make a winding up order. This last point is really no more than an aspect of statutory interpretation: if there had been some intention that the voluntary winding up mechanism should have primacy, s.461(1)(a) would not form part of the Act. See also Kala Capital Pty Ltd [2011] NSWSC 1253 at [6]-[7] (Barrett J); MFS Alternative Assets (in liquidation) v Angstrom Assets Pty Limited [2012] NSWSC 447 at [4] (Black J); Griffin Energy Group Pty Ltd v Griffin Windfarm Holdings Pty Ltd, in the matter of Griffin Energy Group Pty Ltd (subject to Deed of Company Arrangement) [2012] FCA 197 at [17]-[19] (Jacobson J). 7 There is nothing in the present circumstances which would indicate that it might be unconscionable or inequitable to wind up each of the First and Second Defendants. Similarly, there is no indication in the material before the Court that the winding up of the First and Second Defendants might adversely affect the interests of creditors. 8 Further, I am satisfied that the orders sought by ASIC are appropriate to ensure that the affairs of the company can be independently and thoroughly investigated. In reaching this view, I have had regard to the matters deposed to in the Guanlao Affidavit, which have been identified by ASIC during the course of its investigations and enquiries. Those matters include a concern that the funds of prospective investors may have been fraudulently transferred into accounts controlled by the First and Second Defendants. 9 Additionally, the entities in question are associated with a Mr Larry John Dawson (Mr Dawson). Mr Dawson was arrested in December 2020, following an investigation by ASIC, and charged with offences relating to alleged financial misconduct (for a summary of the relevant conduct, see my reasons in Australian Securities and Investments Commission v Dawson [2020] FCA 1144 at [3]). Relevantly for present purposes, the registered address of the First Defendant is listed as the residential address of Mr Dawson, and the director of the First Defendant, Craig Campbell Davis (Mr Davis), has known Mr Dawson for four to five years and holidayed with him overseas. Mr Dawson is also the sole director of the Second Defendant and a complaint of misconduct has been received in connection with that company. 10 Finally, ASIC indicated that an order pursuant to s 461(1)(a) of Act was preferable because the registered liquidators may refuse an appointment pursuant to s 491 of the Act. ASIC submitted that this is so because there is no certainty that the directors of the companies would provide a prospective liquidator with an indemnity for fees associated with any appointment pursuant to that section. I agree. The making an order under s 461(1)(a) will facilitate the orderly winding up of the First and Second Defendants and may enable the liquidators to obtain access to the Assetless Administration Fund (which would not be available to liquidators of a solvent company under s 491 of the Act). Disposition 11 For the reasons set out above, I have made an order for the winding up of the First and Second Defendants and ancillary orders. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou. Associate: Dated: 30 March 2021