Re Australian Resources Limited (In Liq) [2004] NSWSC 1095

New South Wales Supreme Court

CITATION : Re Australian Resources Limited (In Liq) [2004] NSWSC 1095 HEARING DATE(S) : 15/11/04 JUDGMENT DATE : 15 November 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order that each company be wound up in insolvency

CATCHWORDS : CORPORATIONS - winding up - application for order for winding up in insolvency where company already under creditors voluntary winding up - potential advantages to creditors under alternative form of winding up LEGISLATION CITED : Corporations Act 2001 (Cth), Part 5.3A, ss.459A, 459P(1)(e), 467B Carter v New Tel Ltd (2003) 44 ACSR 661 CASES CITED : Citrix Systems Inc v Telesystems Learning Pty Ltd (1998) 28 ACSR 529 Neha Impex International Pty Ltd v Mintz & Co Pty Ltd [2003] WASC 196 Re Australian Resources Ltd [2004] NSWSC 1073 PARTIES : Martin John Green as Liquidator of Australian Resources Limited (In Liquidation) - Plaintiff

FILE NUMBER(S) : SC 5995/04 COUNSEL : Mr R G Forster SC - Plaintiff SOLICITORS : Henry Davis York - Plaintiff

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

BARRETT J

MONDAY 15 NOVEMBER 2004

5995/04 - IN THE MATTER OF AUSTRALIAN RESOURCES LTD (IN LIQUIDATION)

JUDGMENT

1 Each of Australian Resources Ltd and Arimco Mining Pty Ltd is subject to the kind of creditors voluntary winding up that arises as a sequel to voluntary administration under Part 5.3A of the Corporations Act. Mr Green is the liquidator under the voluntary winding up in each case. 2 By an originating process filed on 8 November 2004, Mr Green applies for an order that each company be wound up by the court, with himself as liquidator. The ground relied upon is insolvency and the jurisdiction invoked is therefore that created by s.459A. 3 The standing of a liquidator to seek an order of the court winding up the company of which he or she is liquidator is made clear, in a case such as this, by s.459P(1)(e). Mr Green is therefore a competent applicant for the orders he seeks. As to evidence of insolvency, Mr Green's affidavit is a sound and sufficient basis for concluding that each company was insolvent at some point in 1999 and has remained in that position. 4 It is made clear by s.467B that the court may make a winding up order under s.459A even if the company is already being wound up voluntarily. But, of course, there must be some good reason to do so. 5 By and large there is little practical difference between a creditors' voluntary winding up and the form of winding up imposed by order of the court. The basic procedures and principles are the same in each case. Each course of action sees the claims of creditors determined, the assets of the company collected and realised and assets applied towards creditors' claims. There therefore needs to be some good reason why, in a case where a creditors' voluntary winding up is already in progress, the court should make an order imposing a different form of winding up. 6 It is unlikely that a desire merely to replace the liquidator represents a sufficient reason to make a winding up order in respect of a company already in voluntary winding up unless, perhaps, there is an objectively demonstrated need for replacement: Citrix Systems Inc v Telesystems Learning Pty Ltd (1998) 28 ACSR 529; Neha Impex International Pty Ltd v Mintz & Co Pty Ltd [2003] WASC 196. But that, of course, is not the objective in this instance. 7 In this case, the reason for seeking imposition of a court ordered winding up lies in the provisions of a directors and officers liability insurance policy in respect of the companies for the period 31 December 1998 to 31 December 1999, being a period in which, according to Mr Green's present view of matters, there may have been insolvent trading by the companies. If insolvent trading were to be established, the liquidator could be entitled to obtain recoveries for the companies against their directors, to the potential benefit of the general body of creditors. 8 The terms of the insurance policy are such that it arguably would not cover the consequences of claims against directors for insolvent trading unless the proceedings seeking recovery against directors were commenced by a court appointed liquidator. Whether this is so depends upon the proper construction of the terms of the insurance contract. Obviously, I am not called upon in these proceedings to come to a definitive view on that matter. It is sufficient to say that the prospects of arguing successfully that the policy is responsive to claims against directors for insolvent trading appear to be substantially enhanced if the liquidator pursuing those claims is a court appointed liquidator, as referred to in the policy, rather than a liquidator under a creditors' voluntary winding up. That consideration and the possibility of concomitant benefits to the general body of creditors provide, to my mind, a sufficient reason for making the order that is sought. In Carter v New Tel Ltd (2003) 44 ACSR 661, a corresponding reason related to enhanced prospects of insurance recoveries in similar circumstances was accepted by Austin J as one of three reasons warranting an equivalent order in the circumstances before him. I adopt his Honour's reasoning in that respect. 9 This particular application was before the court on Monday last. On that occasion, the Chief Judge in Equity declined to make the order sought, taking the view that notice should have been given to CGU, the insurer under the directors and officers policy: see Re Australian Resources Ltd [2004] NSWSC 1073. The evidence shows that steps have now been taken by Mr Green to inform CGU and its solicitors of this application. That has resulted in an e-mail from CGU's solicitors to Mr Green's solicitors conveying CGU's instructions that CGU considers that whether or not the application should be made is entirely for Mr Green, that CGU does not wish to be heard on the application and that there is no objection to a copy of the e-mail being shown to the court. Those statements were made in the context of appropriate reservation of rights and statements of non-admission on behalf of CGU. 10 There is also a question about notification to ASIC. ASIC has been notified and has stated that it does not propose to intervene in the matter and neither consents to nor opposes the application. 11 In this case, in contradistinction to the case before Austin J, there are no secured creditors whose interests need to be considered and, so far as the general body of creditors is concerned, there is evidence that in the case of Arimco, but not Australian Resources, there has been positive assent by members of a committee of inspection to the seeking of a winding up order. There has been no adverse reaction from the committee of Australian Resources. 12 Because the companies are already subject to winding up and committees of creditors are in place and have been consulted, there is no practical need for the usual advertising. An order pursuant to s.367(3)(b) dispensing with advertising and all other notification should therefore be made. 13 Mr Green has made out a case for the grant of the relief he seeks. I make the orders 1 to 5 in the short minutes which I initial and date. 14 The costs of the application will be costs in the winding up, to be paid out of the assets of the companies. **********