St George Bank Ltd [2007] NSWSC 134

New South Wales Supreme Court

CITATION : St George Bank Ltd [2007] NSWSC 134 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 26/02/07

JUDGMENT DATE : 26 February 2007

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

EX TEMPORE JUDGMENT DATE : 26 February 2007

DECISION : Order terminating members' voluntary winding up

CATCHWORDS : CORPORATIONS - winding up - termination of winding up - winding up initiated by sole shareholder on basis that no further use for company - now seen that company will be necessary party to various legal proceedings which may need to be commenced in the future - attitude court should take to sole member's wish to terminate winding up

LEGISLATION CITED : Corporations Act 2001 (Cth), ss.482, 509, 511(1)(b)

CASES CITED : Dean-Willcocks v Payce (Buildings) Pty Ltd (unreported, NSWSC, Young J, 1 September 1994) McKern v Pacific Edge Corporation Pty Ltd [2004] NSWSC 1150

PARTIES : St George Bank Limited and Murray Campbell Smith - Plaintiffs

FILE NUMBER(S) : SC 6310/06

COUNSEL : Mr N.P. Reeves, Solicitor - Plaintiffs

SOLICITORS : Mallesons Stephen Jaques - Plaintiffs

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

BARRETT J

MONDAY 26 FEBRUARY 2007

6310/2006 ST GEORGE BANK LIMITED

JUDGMENT

1 This is an application by St George Bank Limited (which I shall call "the Bank") and Mr Smith, the liquidator of St George Equity Finance Limited ("SGEF"). 2 SGEF became subject to voluntary winding up on 8 September 2006. The winding up was initiated by special resolution passed by the sole member of SGEF, which was (and is) the Bank. Because a declaration of solvency was made by the directors of SGEF, the winding up proceeded as a members' voluntary winding up. Mr Smith was appointed liquidator. 3 The Bank and Mr Smith now seek an order for terminating the winding up of SGEF. 4 The application is advanced on the basis of s.511(1)(b) of the Corporations Act 2001 (Cth). That section empowers the court to exercise, in a voluntary winding up, any power that it could exercise if the company were being wound up by the court. The power applicable to winding up by the court that the Bank and Mr Smith seek to invoke through s.511(1)(b) is the power conferred by s.482 to terminate a winding up. That that power is available in the way for which the Bank and Mr Smith contend is borne out by the decisions in Dean-Willcocks v Payce (Buildings) Pty Ltd (unreported, NSWSC, Young J, 1 September 1994) and McKern v Pacific Edge Corporation Pty Ltd [2004] NSWSC 1150. 5 Section 482(1A) identifies competent applicants upon a s.482 termination application. They include the liquidator and a contributory. Hence, Mr Smith and the Bank would be competent applicants under s.482 and must be regarded as competent applicants for an equivalent order via s.511(1)(b) where, as here, that section forms the basis of an application for termination of voluntary winding up. 6 SGEF formerly played a part in the financing activities of the St George Bank Group such that it came to hold certain margin lending receivables. In other words, debts owed by persons with whom margin lending business was transacted were owed to SGEF. In 2002, a contract was entered into between SGEF and the Bank for the sale and transfer by SGEF to the Bank of the entire margin lending receivables held by it for a price of somewhat in excess of $357 million. The contract was formed by means of a written offer of sale made by SGEF to the Bank and acceptance of that offer by an act identified in the written offer as an act which would constitute acceptance, namely, payment by the Bank to SGEF of the specified purchase price. 7 After the transaction of 2002, the relevant assets were taken into the books of the Bank. Some years later, in the course of ordinary administrative processes, SGEF was identified as a company within the St George Group for which there was no further use. It was that which led to the action to cause SGEF to become subject to voluntary winding up in September 2006. 8 More recently, however, it has been realised that, because the assignment of receivables effected in 2002 was, of its nature, an equitable assignment only, SGEF needs to lend its name to any proceedings to recover the relevant receivables. It is apprehended that that state of affairs may continue for a considerable time. Although the Bank is administering the receivables, the role that SGEF would have to play in any enforcement proceedings is now regarded as making it inappropriate for the winding up of SGEF to proceed in the ordinary course to its logical conclusion. 9 The function and duty of the liquidator are, of course, to collect and realise the assets, ascertain and pay the creditors and ultimately distribute surplus to the sole shareholder. In this case, the evidence shows that there are no creditors, so that winding up would entail, after expenses and remuneration had been met, distribution to the Bank but, for the reasons stated, it is inconvenient and inappropriate that the process ultimately directed towards SGEF's dissolution pursuant to s.509 should proceed. Rather, that process should be halted so that SGEF can play whatever part may be required of it in the future as occasion arises for proceedings to be commenced in respect of any of the assigned receivables. It is for that reason that both the Bank and the liquidator wish to see the winding up terminated. 10 Applications of this kind usually involve companies about which there is room for doubt about solvency. That is clearly not the case here. SGEF has never been insolvent and the affidavit of the liquidator makes it clear that it is solvent today. To the extent that solvency is a matter which ought to be considered upon every application for termination of winding up, it may be regarded as presenting no obstacle in this case. Otherwise, it seems to me, no particular constraint ought to be seen to affect the exercise of the obvious discretion that the court has under s.482, as imported by s.511(1)(b). 11 This is a simple case in which the sole shareholder decided to put in train steps directed towards ultimate dissolution of the company at the conclusion of a members' voluntary winding up and did so for reasons of administrative convenience related to the management of the St George Bank Group. Likewise, and for reasons of the same kind, the sole shareholder now wishes to put a stop to the process that it had previously thought would be beneficial. 12 No reason has been shown or suggested why the wishes of the sole shareholder in that respect should not be given effect to. Nothing in the evidence before me points in any way to any basis on which the order should not be made. A sole member, having brought about a members' voluntary winding up, cannot alone act to put an end to it (see the discussion at paragraph 16.250 of "McPherson's Law of Company Liquidation", fifth edition, 2006, by M G R Gronow and R Mason). But the court has power to do so and, absent any demonstrated reason why the sole member's wish should not be implemented, the court, having screened the application in the usual way (and, in particular, considered the interests of creditors and any public interest – neither of which is an issue here), should be willing to order accordingly. 13 I order that the winding up of St George Equity Finance Pty Limited ACN 060 017 923 be terminated this day 26 February 2007. The order may be taken out forthwith. **********