Reported Decision : (2000) 34 ACSR 669 New South Wales Supreme Court CITATION : Wong v Australia Machinery Equipment Sales Pty Ltd [2000] NSWSC 623 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2762/2000 HEARING DATE(S) : 14 and 15 June 2000 JUDGMENT DATE : 15 June 2000 PARTIES : Joseph Tak-Wong Wong (P) Australia Machinery Equipment Sales Pty Limited (D) JUDGMENT OF : Young J COUNSEL : S Archer and G Raffell (P) M Ashhurst (D) Smits Leslie (P) SOLICITORS : M D Nikolaidis & Co (D) CATCHWORDS : CORPORATIONS [238][287]- Winding up- Creditors voluntary winding up meetings convened- Quaere whether valid- Opposing application for provisional liquidator- Dispute to be resolved in least costly way. LEGISLATION CITED : Corporations Law ss 459P(2), 472(2), 490 Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 635 Emanuele v Australian Securities Commission (1997) 188 CLR 114 CASES CITED : Re Lockyer Valley Fresh Foods Co-operative Association Ltd (1980) 5 ACLR 282 Re McLennan Holdings Pty Ltd (1983) 7 ACLR 732 Riviana (Aust) Pty Ltd v Laospac Trading Pty Ltd (1986) 10 ACLR 865 DECISION : See para 13 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J THURSDAY 15 JUNE 2000 2762/2000 - WONG v AUSTRALIA MACHINERY EQUIPMENT SALES PTY LTD JUDGMENT 1 HIS HONOUR: This is an application under s 459P(2) of the Corporations Law for leave to allow a director to make an application to wind up a company on the ground of insolvency. 2 The defendant company (the "Company") has purported to convene a meeting of its members and creditors at noon today for the purpose of considering a creditors' voluntary winding up. That must mean that the directors are not prepared to sign a declaration of solvency. That fact, together with the material contained in the plaintiff Mr Wong's affidavit, in the absence of any contrary material make it appear to me that on the evidence before the Court at present, the balance of probabilities are that the Company is insolvent. Accordingly, it is a situation where I am able to give leave for a director to bring an application to wind up the Company. 3 In light of the complications referred to in Mr Wong's affidavit, and in light of the consent of the liquidator of Ostabridge Pty Limited, it seems to me that I should make an order under section 459P(2) that the plaintiff can commence proceedings to wind up the Company on the ground of insolvency. The decision of the High Court in Emanuele v Australian Securities Commission (1997) 188 CLR 114, is authority for the proposition that one can make such an order nunc pro tunc. 4 As the proceedings are now on foot, it is competent for the Court to make an order appointing a provisional liquidator under section 472(2) of the Corporations Law. The appointment is in the discretion of the Court and the Court takes into account the general principles as stated by Master Lee, as Lee J then was, in Re McLennan Holdings Pty Limited (1983) 7 ACLR 732, 737-8 as adopted by the NSW Court of Appeal in Constantinidis v JGL Trading Pty Limited (1995) 17 ACSR 635, 636. 5 In the instant case the assets of the Company do not appear to be in jeopardy in the traditional sense. A series of matters of concern have been raised by Mr Wong in his affidavit. Those matters, if in due course are established, might warrant the Court placing a provisional liquidator in charge so that the interests of creditors generally can be preserved; see Re Lockyer Valley Fresh Foods Co-operative Association Limited (1980) 5 ACLR 282 and Riviana (Aust) Pty Limited v Laospac Trading Pty Limited (1986) 10 ACLR 865. 6 In my view some protection should be given to the creditors by having someone other than the directors in control of the Company. This is reinforced by the fact that the directors themselves have convened a meeting to consider a creditors' voluntary winding up, which to my mind indicates that they themselves realise the need for external administration. 7 This then raises the problem as to how far the Court should intervene at this stage, or let the meeting to consider a creditors' winding up proceed and make its resolution. Section 490 of the Corporations Law means that as I have now given leave for these proceedings to be brought, leave has to be given before a resolution can be passed to appoint a liquidator. When the Court has power to give leave it also has power to make an order subject to any conditions. 8 The attitude of the Corporations Law as to whether there should be a voluntary winding up or a Court winding up has vacillated over the last hundred years. As I understand the spirit of the present legislation, with the enhanced powers given to liquidators in a voluntary winding up there is essentially no real difference between the two. However, under s 490, once there is an application in insolvency, leave has to be given for a voluntary winding up. My view is that the creditors should be permitted to meet and discuss the matter. The effect of that may be that the Company can go into liquidation straight away and so save some administrative costs. In an application for winding up on insolvency the Court must always look at the matter from the point of view of the applicant creditor who ex debito justitiae is entitled to a winding up if a debt can be proved, but must also look at the matter in the public interest because what is being activated is to a great extent a class right. Accordingly the Court is not attracted by any way forward which may involve additional administration costs. 9 On the other hand, Mr Wong in his affidavit has indicated that he may seek to challenge the validity of the meeting on the basis that he is still a director of the Company and was not notified of any directors' meeting which authorised the convening of the meeting. That challenge may or may not be made, or if made, may or may not succeed. I must keep in mind that there may be expensive litigation if it is made and there may be further litigation in an application under section 1322 of the Corporations Law to cure any technical defect. 10 In general, the Court leans in favour of meetings for which notice has already been given being held so that the real views of the members and creditors can be heard. That consideration in the instant case is dulled by the fact that one cannot be sure whether the meeting will be truly representative of the people who claim to be creditors and the people who claim to be members. Nonetheless, I think it should be held. The principal sticking point appears to be that the person nominated by the Company is favourably disposed to the persons who have been described as the Stafford interests and is said by the plaintiff to be a person to whom he objects as being too closely associated with one of the directors. 11 As Mr Ashhurst for the Stafford interests says, nothing has been proved against this gentleman, nor, even if it was said that he had a professional association with one of the directors, would that be enough to disqualify him. However, I cannot see any good reason why there should be litigation over the issue when another person can be appointed who may not attract such criticism. 12 Accordingly I think I should give leave under s 490 for the Company to resolve that it might be wound up voluntarily on two conditions: (a) that the person named in paragraph 45 of the affidavit of Mr Wong is not proposed as liquidator; and (b) that the chairman of the meeting file a report of the meeting verified by affidavit in these proceedings no later than 4pm tomorrow. 13 The formal orders are: 1. Order pursuant to s 459P(2) of the Corporations Law that the plaintiff as a director of the defendant has leave to bring this application nunc pro tunc. 2. Leave to the defendant pursuant to s 490 of the Corporations Law to resolve that it be wound up voluntarily on condition that: (a) the person referred to in paragraph 45 of Mr Wong's affidavit of 13 June 2000 is not appointed liquidator; and (b) the chairman of the meeting furnish to the Court and serve on the plaintiff's solicitors a report verified by affidavit as to the meeting no later than 4pm on 16 June 2000. 3. The Court notes that in imposing condition 2(a) it in no way makes any criticism of the professional standing or abilities of the person concerned. 4. The costs of the application to appoint a provisional liquidator are reserved. 5. Proceedings stand over to the Corporation Judge's List on 19 June 2000 at 10 am. 6. The notice to produce to the defendant stands over to the Deputy Registrar's subpoena list on 19 June at 9am. 7. The exhibits may be returned on the basis that they will be produced for any subsequent hearing. *************** Last Modified: 09/26/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.