Blundell v Macrocom Pty Ltd [2004] NSWSC 895

Reported Decision : 50 ACSR 549

New South Wales Supreme Court

CITATION : Blundell v Macrocom Pty Ltd [2004] NSWSC 895 revised - 29/09/2004 HEARING DATE(S) : 27/09/04 JUDGMENT DATE : 28 September 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Administrator's application for directions refused. Winding up order made.

CATCHWORDS : CORPORATIONS - voluntary administration - pending winding up application - whether administrator has power to compromise pre-existing debt of applicant for winding up - whether power properly exercisable - company insolvent - direction refused - winding up order made LEGISLATION CITED : Corporations Act 2001 (Cth), ss.437A, 442A, 459E Re Ansett Australia Ltd (2001) 39 ACSR 355 CASES CITED : Re NC RE Capital Ltd (1999) 32 ACSR 418 St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd [2004] NSWSC 851 PARTIES : Barnett Blundell - Plaintiff Macrocom Pty Limited - Defendant FILE NUMBER(S) : SC 4368/04 COUNSEL : Mr A A Loel, Solicitor - Plaintiff Mr T Hall - Defendant SOLICITORS : Toomey Pegg Drevikovsky - Plaintiff Matthews Folbigg Pty Limited - Defendant

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

BARRETT J

TUESDAY, 28 SEPTEMBER 2004

4368/04 – BARNETT BLUNDELL v MACROCOM PTY LTD JUDGMENT 1 The plaintiff is a former employee of the defendant. On or about 12 July 2004, he served on the defendant a creditor's statutory demand under s.459E of the Corporations Act 2001 (Cth) in respect of debts totalling $84,166.75 for unpaid salary. There is a statement in the affidavit of the defendant's sole director that the plaintiff was also a director of the defendant and ceased to hold office as such on 30 June 2003. Relying on the defendant's non-compliance with the statutory demand, the plaintiff filed an originating process on 5 August 2004 seeking a winding up order. 2 The originating process was returnable on 6 September 2004. On 2 September 2004, however, a secured creditor of the defendant acted under s.436C to appoint an administrator. When the winding up application came before the court on 6 September 2004, Campbell J stood it over to 20 September 2004 after noting evidence suggesting that a deed of company arrangement might possibly be proposed. 3 When the winding up application came before me on 20 September 2004, the administrator, Mr Whitton, sought leave to file an interlocutory process containing an application for directions under s.447D of the Act which empowers the court to give directions to an administrator "about a matter arising in connection with the performance or exercise of any of the administrator's functions and powers". The matter in respect of which the administrator thus foreshadowed a request for the court's guidance was whether the plaintiff's claim upon which the winding up application was based might be compromised in such a way that a slightly smaller sum was paid as an expense of the administration, whether that sum should be paid "as a priority creditor claim in the liquidation of the company" and as to the extent to which any security should be provided for the plaintiff against the possibility of a later finding that he was involved in the trading of the defendant while it was insolvent. 4 The administrator's interlocutory process was ultimately filed in court on 27 September 2004 together with his supporting affidavit. I heard the application on that day when the further adjourned winding up application also came before me. 5 The administrator's affidavit incorporates a report as to the position of the defendant. Dealing with the plaintiff's claim, the administrator says that he has established an entitlement to a sum for unpaid salary slightly smaller than that claimed in the statutory demand, "unless evidence to the contrary" [sic]. The sum to which the administrator refers is $82,602, compared with the $84,116.75 claimed. As to the defendant's financial position generally, the administrator reports assets of $1,812,332 compared with liabilities of $44,274,324 representing a deficiency of $42,411,992. The residual claim of the secured creditor by which the administrator was appointed is recorded as $5,234,157. The administrator also mentions having come to the conclusion that, in a winding up, there may be claims for recovery of unfair preferences and in respect of uncommercial transactions and insolvent trading. Finally, the administrator reports his opinion as to the likely fate of the defendant. With no deed of company arrangement proposal having materialised and a situation of clear insolvency existing, the administrator's view is that winding up is inevitable. The second meeting of creditors in the winding up is to take place on 30 September 2004. 6 The administrator's interlocutory process raises two basic questions: first, whether the administrator, acting as such, has power to cause the defendant to pay $82,602 in full satisfaction of the claim upon which the plaintiff bases his winding up application; and, if so, whether the administrator may properly exercise that power in the circumstances of this case. 7 Mr Hall of counsel who appeared for the administrator referred to the broad powers conferred upon an administrator by s.437A: " Role of administrator