New South Wales Supreme Court CITATION : Smith & Hayes re Gympie Gold Ltd (in liq) [2005] NSWSC 1141 HEARING DATE(S) : 31 October 2005 JUDGMENT DATE : 31 October 2005 JURISDICTION : Equity Division JUDGMENT OF : Palmer J DECISION : Leave granted for liquidators to appoint themselves administrators; prospective termination order refused. CATCHWORDS : CORPORATIONS – ADMINISTRATION – Whether liquidators should be given leave to appoint themselves administrators. - LIQUIDATION – TERMINATION – Whether prospective self-executing order for termination of liquidation should be made. LEGISLATION CITED : Corporations Act 2001 (Cth) – s.436B Murray Campbell Smith & Joseph David Hayes PARTIES : (Joint Liquidators of Gympie Gold Ltd (in liq) (R&M appointed) - Plaintiffs FILE NUMBER(S) : SC 5648/05 COUNSEL : C.D. Wood – Plaintiff SOLICITORS : Minter Ellison – Plaintiff LOWER COURT JURISDICTION : Ex tempore 1 This is an application for leave to be granted to the liquidators of Gympie Gold Ltd (in liq) pursuant to s.436B(2) of the Corporations Act 2001 (Cth) to appoint themselves as voluntary administrators of the company pursuant to s.436B(1). 2 The purpose of the application is to bring about a Deed of Company Arrangement which will eventually result in the unsecured creditors of the company receiving more under the administration than they would otherwise receive if the liquidation of the companies were to continue. That desirable result, however, depends upon a number of contingencies which are explained in the evidence. 3 The series of commercial transactions which would result in the Deed of Company Arrangement providing a successful return to the unsecured creditors are somewhat complicated and it is not necessary for me to discuss them in any detail. However, I am satisfied that there is a real enough prospect of the successful outcome of those negotiations to warrant the liquidators in setting in motion the machinery for a Deed of Company Arrangement as they now seek to do. The first question is whether the liquidators should have leave to appoint themselves as voluntary administrators. 4 It is quite clear from the evidence that the liquidators have undertaken a great deal of work in undertaking negotiations which have brought about the possibility of the Deed of Company Arrangement. They are familiar with the problems involved and with the documentation in question, and it would be clearly enough a wasteful duplication of time and resources for new administrators, unacquainted with the company's affairs, to be introduced at this stage of the proceedings. The evidence does not suggest that the liquidators would have any obvious conflict of interest in taking on the appointment of administrators as well. I note in this regard that the committee of inspection has been notified as well as the other unsecured creditors of the company of the liquidators' intention to seek leave to appoint themselves as administrators and there has been no objection expressed. 5 If, in the course of the administration, any unsecured creditor takes objection to the appointment of the liquidators as administrators, that creditor will not be precluded from making the appropriate application to the Court. 6 However, as matters presently stand, for the reasons which I have given, I think it is entirely appropriate to grant leave to the liquidators to appoint themselves as administrators. 7 The question is as to whether the Court should make an order now that the company's winding up be terminated upon the filing of an affidavit which deposes that certain preconditions have been met. That order, being a prospective and self­executing order for termination of a liquidation, is a highly unusual order and would not be made except in extraordinary circumstances. The Court is usually concerned to ensure that it does not terminate the winding up of a company unless it is quite clear that the company is solvent and that it poses no commercial risk in the market place to those who may be dealing with it, and that there are no other circumstances which would militate against the release of the company from administration under liquidation. 8 There are in this case many complicated negotiations to be concluded before it will be apparent that the Deed of Company Arrangement will be brought to successful fruition. The Deed of Company Arrangement itself provides for an application to be made for the early termination of the liquidation. It seems to me that if the Deed of Company Arrangement is approved by the creditors and the company and is executed and if the administrators are then able to report to the Court that the Deed of Company Arrangement is progressing satisfactorily and that there is no reason to suppose it will not be brought to successful fruition as contemplated by its terms, then there is a good prospect that the Court would exercise its discretion in favour of granting an early termination of the liquidation. 9 However at this stage, before the Deed is even approved by creditors, let alone executed, and before the implementation can be evaluated, I think it is premature to make a contingent and prospective order for the termination of the liquidation. 10 In those circumstances, I will make the orders sought in paragraphs 1, 2, 3, 4, 5 and 7 of the Short Minutes of Order initialled by me, dated today and placed with the papers. 11 The balance of the application, that is the application for termination of the liquidation will be stood over to another date. 12 I will stand the matter over to the Corporations List on 6 February 2006 with liberty to apply. 13 Exhibits may be returned. ~ oOo ~ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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