New South Wales Supreme Court CITATION : re Agriculture.Com Pty Limited (in liquidation) [2003] NSWSC 145 HEARING DATE(S) : 03/02/03; 24/02/03 JUDGMENT DATE : 13 March 2003 JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order that liquidator justified in treating moneys as assets of company CATCHWORDS : CORPORATIONS - winding up - creditors voluntary winding up - application by liquidator seeking to clarify status of moneys received by company - notice to person asserting claim to moneys - arrangement with such person that liquidator seek order of court - court directs that the person be given express notice of adjourned hearing - appropriate form of relief discussed LEGISLATION CITED : Corporations Act 2001 (Cth), ss.479(3), 511 CASES CITED : Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 Shiraz Nominees Pty Ltd v Collinson (1985) 10 ACLR 7 PARTIES : Steven John Sherman - Plaintiff FILE NUMBER(S) : SC 5562/02 COUNSEL : Mr C R C Newlinds - Plaintiff SOLICITORS : Clayton Utz - Plaintiff - 10 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY, 13 MARCH 2003 5562/02 – STEVEN JOHN SHERMAN RE AGRICULTURE.COM PTY LIMITED (IN LIQUIDATION) JUDGMENT 1 The plaintiff is the liquidator of Agriculture.Com Pty Limited ("the company") which is subject to creditors voluntary winding up pursuant to s.446A of the Corporations Act 2001 (Cth) as a sequel to Part 5.3A voluntary administration. 2 In his capacity as liquidator of the company, the plaintiff seeks directions as to the appropriate treatment of certain funds in his hands. He claims an order that he is justified in treating as assets of the company sums totalling $178,793.34 received by him; alternatively, that he is justified in treating those moneys as held on trust for Kameg Pty Limited trading as McGregor Gourlay Agricultural Services, Moree. I shall refer to that company as "McGregor Gourlay". 3 The plaintiff's originating process is expressed to be founded on ss.479 and 511 of the Corporations Act. I shall return to the jurisdictional basis presently. 4 The business of the company entailed the supply of agricultural chemicals and fertiliser products. The company obtained goods from various sources, including McGregor Gourlay. It acted essentially as a procurer for its clients and arranged delivery to them of products they required. The question central to the plaintiff's application is whether, in relation to the transactions involving the moneys in question, the company acted as principal when it bought the relevant products from McGregor Gourlay and on-sold them to its own clients or whether it acted as an agent for McGregor Gourlay in effecting sales by McGregor Gourlay to clients of the company who thereby became purchasers from McGregor Gourlay. 5 The plaintiff has tendered a series of orders and invoices in relation to the transactions to which the aggregate of $178,793.34 relates. It appears that the company placed purchase orders upon McGregor Gourlay requesting delivery of particular goods to a particular properties. I refer, by way of example, to an order addressed by the company to McGregor Gourlay and dated 23 January 2001 for the purchase of six 200 litre containers of "Rescue" and twenty 20 litre containers of "Pegasus" marked, "Destination: 'Wire Lagoon', Narrabri" and "Delivery Notes: Mungindi Freight Service". McGregor Gourlay apparently issued invoices to the company in respect of goods so ordered. Hence, there is in evidence, matching the purchase order just mentioned, an invoice of 23 January 2001 addressed by McGregor Gourlay to the company referring to goods of the same description as in the purchase order and showing a total price of $47,414.00 ($43,104.00 plus $4,310.40 GST) charged to the company and marked "Deliver to: Wire Lagoon 23/01". 6 The third documentary element related to each transaction is an invoice issued by the company to the consignee. The particular order and invoice, both dated 23 January 2001, to which I have already referred are thus supplemented by an invoice dated 31 January 2001 addressed by the company to Wire Lagoon, Narrabri, referring to quantities of "Rescue" and "Pegasus" corresponding with those already mentioned and showing an amount payable of $49,500.00, being $45,000.00 plus $4,500.00 GST. This pattern is repeated in the other order and invoice sets. 7 These documents suggest, on their face, purchase by the company from McGregor Gourlay and an on-sale, at a mark-up, by the company to the consignee customer. Had the evidence left matters there, no apparent reason would have existed for thinking that moneys received by the company from consignee customers did not belong beneficially to the company. Viewed in the particular documentary context to which I have referred, the mark-up is a strong indicator of the existence of two sales, each between principals. Indeed, that documentary context does not seem to me to admit of any other conclusion. 8 A question is, however, raised by an assertion made by letter dated 29 March 2001 sent by McGregor Gourlay to the company. The letter is as follows: "My name is Tony Johnson. I am employed by Kameg Pty Limited trading as McGregor Gourlay Agricultural Services ('MGAS') as Supply Manager. Amongst my duties, I am responsible for the sales this business makes to its wholesale customers including Agriculture.Com Pty Limited ('Ag.Com'). We commenced business with Agriculture.Com in April 2000 and continued trading until early February 2001 when the company ceased operations. Throughout this period I clearly understood that Ag.Com operated only as a broker i.e. as an agent between ourselves and the growers/farmers. At no stage did I believe or understand Ag.Com to be the principal in any transactions between ourselves. At the date of writing we are owed the following amounts by the following parties: Wire Lagoon Narrabri $ 107 258.36 Whitegates Condoblin $ 67740.64 D Cush Saltwell $ 21 236.92 Others $ 37 195.06 $ 233 431.06 I confirm that these amounts are due to us rather than Ag.Com as Ag.Com acted merely as an agent/broker in these arrangements." 9 The plaintiff, when deed administrator, wrote to McGregor Gourlay as follows on 8 August 2002: "I refer to our correspondence regarding your assertion that Ag.com acted as your agent and respond as follows: I am currently holding $178,793.34 being monies collected from debtors for invoices involving product supplied by McGregor Gourlay (the ' Money '). No further realisations are expected from Ag.com's debtors. Having carefully considered the material which you have submitted to date, I note the following matters: (i) There is no written agreement whereby Ag.com is appointed the agent of McGregor Gourlay. (ii) The Application for Credit Account (' Application ') submitted by Ag.com to McGregor Gourlay makes no reference to such a relationship. However, the Application does contain a retention of title clause in the following terms: ' I/We understand that ownership of goods shall remain with McGregor Gourlay AG Services, which reserves the right to dispose of the goods until such time as payment in full for all goods has been received.' If anything, the existence of such a clause suggests that the relationship was simply that of debtor and creditor and not agent and principal. (iii) Even if the relationship was one of agent and principal, it does not necessarily follow that monies collected by Ag.com from its customers are held on trust for McGregor Gourlay. Certainly, the documentary material which you have supplied to date does not contain any express provision to that effect. In the circumstances, I invite you to submit any additional documentation or information which you believe establishes both the existence of an agency relationship between Ag.com and McGregor Gourlay and an intention that any monies collected by Ag.com from its customers for product sourced from McGregor Gourlay be held on trust for McGregor Gourlay. It would be appreciated if any such material could be supplied by 26 August 2002. Please do not hesitate to contact the writer or John Slaytor on 9286 9960 if you have any queries in relation to the above." 10 The document referred to in paragraph (ii) of this letter is in evidence. The part of that document quoted in the letter certainly implies a relationship of seller and buyer between McGregor Gourlay and the company. 11 Also in evidence is a form of agreement made by the company with some of its clients. This refers to the company being appointed as the client's "procurement vehicle" and acting as the client's "agent" to procure goods. It concludes: "We will 'stand behind' and ultimately take liability for any transactions Agriculture.Com Pty Ltd does on behalf of our organisation." There is nothing to show, however, that an agreement in this form was in place in the cases relevant to the moneys now in question involving purchases from McGregor Gourlay. 12 Reference should also be made to a letter to the company from the ANZ Bank concerning structuring of the company's banking arrangements. The letter says that the bank is "awaiting instructions on who shall be the legal owner of the account". It goes on to canvass the possibility of sub-accounts within the single bank account, with each sub-account assigned to one "manufacturer". The letter continues: "The ANZ's OnLine's Sub-Account arrangement enables all receivables to be banked through a single account. Each supplier would be allocated a specific agent number. Credits into the account would then be broken up and dispersed to the sub-accounts. End of month disbursements back to the suppliers would then in effect aggregate all collections each month, with the ensuing cost savings in administration, fees and government charges. (There is a degree of manual intervention in the process as the amounts and allocations to each supplier will vary with each invoice. Additional accounting software may however be incorporated to automate the process.) All entries are then captured and reported on electronic statements for reconciliation purposes. In this way, a central account can be split into several ledgers, or sub accounts." The ANZ letter concludes by referring again to the need to resolve "the agency account ownership issue". 13 With the evidence in this state, it is really only the assertion by McGregor Gourlay in its letter of 29 March 2001 that casts any real doubt on the impression of two principal to principal sales arising from the series of orders and invoices representing the documentary basis for the transactions in question. A significant element of that impression is the discrepancy between the price apparently charged by McGregor Gourlay to the company and the higher (or mark-up) price charged by the company to the client. The ANZ Bank letter may, I think, be substantially discounted as it refers to uncompleted proposals for the structuring of banking arrangements and cannot be taken as any reliable indicator of the existence of any agency or trusteeship. The form of client agreement may also, I think, be largely discounted because of lack of established connection with the particular parties and transactions. 14 In the light of McGregor Gourlay's assertion of 29 March 2001, it is relevant to record that, on 25 September 2002, the plaintiff informed McGregor Gourlay in writing of his intention to seek directions from the court and proposed an agreement with McGregor Gourlay that both parties should accept the outcome of the application. McGregor Gourlay signified its acceptance by signing and returning a copy of the letter. On 19 November 2002, the plaintiff's solicitors wrote to McGregor Gourlay enclosing copies of the plaintiff's originating process and supporting affidavit and observing that McGregor Gourlay may wish to have its lawyers appear on the return date. McGregor Gourlay acknowledged receipt of that letter. 15 When the plaintiff's application first came before me on 5 February 2003, I directed that further notice be given to McGregor Gourlay to be sure that it had a full opportunity to place before the court whatever it thought fit to advance in support of its assertion. The plaintiff's solicitors wrote to McGregor Gourlay on that day reporting that the matter had been before the court and had been adjourned to 10am on 24 February 2003, also that I was "concerned to ensure there was one further opportunity for any further relevant information to be put before the Court". The letter concluded: "In the absence of any appearance by McGregor Gourlay on that occasion, the Court will proceed on the assumption that it has nothing further to say that has not already been placed in correspondence or otherwise included in the Affidavit of the Liquidator (a copy of which was provided to you with our letter of 19 November 2002)." 16 It was perhaps not altogether correct to say that, in the absence of further word, the court would proceed on the assumption stated in the letter. But the substance of the message conveyed by the letter was correct and unmistakable, namely that the court wished McGregor Gourlay to know when the adjourned application would next be before it so that McGregor Gourlay might, if it wished, seek to raise anything it considered relevant to its assertion of 29 March 2001. In the event, the only new evidence I received when the adjourned application came before me on 24 February 2003 was evidence of despatch of the plaintiff's solicitor's letter of 5 February 2003 by prepaid post to the registered office of Kameg Pty Limited at Moree. 17 The clear indication of successive principal to principal sales created by the orders and invoices is not called into question by other evidence. Apart from the form of client agreement and the ANZ Bank letter (both of which, as I have said, must be substantially discounted in relation to the particular moneys in question), the only thing that would suggest the possibility of any agency and trust arrangement is the unsupported and unexplained assertion of McGregor Gourlay. That company was made aware of the court's concern that it be able to advance anything further it might wish to advance in support of the characterisation for which it contended but nothing has been forthcoming. 18 I return now to the question of jurisdiction as a preliminary to formulating the relief to be granted to the plaintiff. 19 Section 479(3) enables the liquidator in a winding up ordered by the court to apply to the court for directions in relation to any particular matter arising under the winding up. That section has no direct application in this case because, as I have said, the company is subject to creditors voluntary winding up pursuant to s.446A as a sequel to Part 5.3A administration. It may be that s.511(1)(b) indirectly creates an equivalent avenue for a liquidator in a case such as the present, on the footing that a liquidator in a voluntary winding up is, by s.511(1)(b), enabled to apply to the court to exercise any power that it could exercise if the company were being wound up by the court. On the face of things, there is no reason why s.511(1)(b) does not make available to a liquidator in a voluntary winding up the same ability to apply for directions under s.479(3) as is possessed by a liquidator in a court ordered winding up. 20 I am, however, conscious of the fact that, in Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209, Young J pointed to important differences between s.479(3) and s.511 and to the significance of the fact that the liquidator in a court ordered winding up is an officer of the court whereas a the liquidator in a voluntary winding up is not. Section 511 imposes, by sub-s.(3), as a condition of the court's jurisdiction to make a s.511 order, that it be satisfied that it will be "just and beneficial" to do so. That requirement does not form part of the s.479(3) jurisdiction and may militate against the prima facie position to which I have referred. 21 There is, in any event, no need to pursue these questions since s.511(1)(a) empowers the court to "determine any question arising in the winding up of a company" and I not only regard the question raised by the plaintiff's originating process to be within that description but also consider that it will be "just and beneficial" to dispose of the question. It is true that there are a number of cases in which it has been said that s.511(1)(a) should not be invoked by way of ex parte application by a liquidator, as here. The matter is discussed in Shiraz Nominees Pty Ltd v Collinson (1985) 10 ACLR 7. The rule is not, however, an inflexible one and an ex parte application may be appropriate in certain circumstances: see Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (above). I consider the present to be such a case, given that the liquidator's application was made not only with the full knowledge of the only other party conceivably affected (being McGregor Gourlay) but by express arrangement with that party and in the context of full opportunity for it to it to seek to be a party or to place its views before the court. 22 It is appropriate to make an order declaring that the plaintiff is justified in treating as assets of the company the various moneys collected by the plaintiff as detailed in the originating process filed on 19 November 2002. I therefore make order 1 in that originating process. I also make order 3 as to costs. ********** Last Modified: 03/17/2003 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.