In the matter of Dave Lahood Pty Limited [2013] NSWSC 597

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Dave Lahood Pty Limited [2013] NSWSC 597 Hearing dates: 10 May 2013 Decision date: 10 May 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made for the appointment of provisional joint liquidators. Catchwords: CORPORATIONS - winding up - whether to appoint a provisional liquidator - whether a risk to company assets. Legislation Cited: Corporations Act 2001 (Cth) ss 249B, 461(1)(a), 472, 1072C Texts Cited: - Austin and Black's Annotations to the Corporations Act [5.472] Category: Interlocutory applications Parties: Paul Andrew Leroy as Trustee in the Bankrupt Estate of David Lahood (Plaintiff) Dave Lahood Pty Limited (Defendant) Representation: Counsel: R. Marshall (Plaintiff) Solicitors: Bartier Perry (Plaintiff) File Number(s): 2013/145558

Judgment 1By originating process filed 10 May 2013, the plaintiff, Mr Paul Leroy, as trustee in the bankrupt estate of Mr David Lahood ("Trustee") seeks orders under s 249B, 461(1)(a) and 1072C of the Corporations Act 2001 (Cth) directed to securing the winding up of the defendant, Dave Lahood Pty Ltd ("Company"), in insolvency. In particular, the Trustee seeks a declaration that he is entitled to be registered as holder of all of the issued shares in the Company; and an order that Mr Lahood, or in default the Registrar, do all things and sign all documents necessary to cause the Trustee to be so registered and notified to the Australian Securities and Investments Commission as the holder of the issued shares in the Company and an order that the Company be wound up and liquidators appointed. 2The originating process relies on s 1072C of the Corporations Act which deals with the rights of the trustee of a bankrupt shareholder's estate and s 249B which would allow a resolution of a one member company for its winding up to be passed in a specified manner. The originating process also relies on 461(1)(a) of the Corporations Act, which authorises the Court to make an order winding up the Company if it has resolved by a special resolution that it be wound up by the Court. 3By interlocutory process also filed on 10 May 2013, the Trustee seeks an order that Simon John Cathro and Philip Campbell-Wilson be appointed as liquidators of the Company provisionally. A consent of provisional liquidator of Messrs Cathro and Campbell-Wilson has been filed. 4The Trustee also seeks an order dispensing with the need to serve the Company with that application. It seems to me that order can properly be made, where, as Mr Marshall who appears for the Trustee points out, control of the bankrupt's shares in the Company is intended to pass to the Trustee under s 1072C of the Corporations Act, so that he holds the remaining economic interest in the Company for the benefit of creditors; and the only director of the Company is Mr Lahood, whose capacity to function as director is restricted by his bankruptcy. There would be no utility in service of the application on the Company where the director does not have power to authorise the Company to take any particular position in respect of it. 5I turn now to the substantive application for the appointment of a provisional liquidator brought by the interlocutory process. The background to that application is set out in the affidavit of the Trustee sworn in support of the application. At the time of his bankruptcy, Mr Lahood carried on a car dealership business in Homebush as the sole trader, on land owned by the Company. The Trustee has taken steps to recover certain vehicles used in that business. The Company is, as I noted, the registered proprietor of the land on which the business was conducted. The Company has borrowings from ING Bank Ltd, which are secured on that land; the Company also has borrowings from Bank of Western Australia Ltd, which has a caveat over the land, and the Office of State Revenue also has a caveat over the land for outstanding land tax. 6The Trustee indicates that his investigations disclose that the market value of the land owned by the Company will, or at least may, exceed the amount of the debts owed to ING Bank, Bank of Western Australia and the Office of State Revenue. In a liquidation of the Company, in which the surplus is distributed to its sole contributory, the bankrupt's estate, there may be a distribution of that surplus to the Trustee which would be available for the benefit of creditors and, if the amount of the surplus exceeds the amount of debts, potentially for the benefit of Mr Lahood. 7A particular difficulty presently arises, to which the Trustee refers in his affidavit, namely, that he has been informed by his staff that Mr Lahood has advised that the business premises situated on the property, which comprise a car lot, office and showroom, are presently uninsured and unoccupied. Mr Marshall contends, plainly correctly, that this exposes the assets of the Company and the Trustee and creditors' prospect of distribution to a significant risk of damage. In particular, it is foreseeable that the value of the property could be adversely affected by, for example, an uninsured event if the present position continues. 8The Court has power to appoint a provisional liquidator, under s 472 of the Corporations Act, at any time after the filing of a winding up application and before the making of a winding up order. In the present case, the originating process seeks a winding up order. The first question which the Court must determine in considering whether to appoint a provisional liquidator is whether there is a reasonable prospect that a winding up will be made in the present case. I can readily be satisfied of that matter because s 1072C of the Corporations Act contemplates that the Trustee may take control of the bankrupt's share, as he has done by transferring the bankrupt's share in the Company to him; s 249B permits a resolution of the Company to be passed, on the face of it, in the manner which the Trustee has done by signing a resolution of sole shareholder for the winding up of the Company by the Court; and s 461(1)(a) permits the Court to order the Company to be wound up on a special resolution passed by it. In these circumstances, there is a serious question to be tried that the Court will ultimately grant a winding up order. 9In order to appoint a provisional liquidator, the Court must be satisfied there is some good reason for that appointment, and one category of good reason includes a risk to assets of the Company: see the cases cited in Austin and Black's Annotations to the Corporations Act [5.472]. In the present case, the Company's only identified asset, the business premises on which the car sale business has been conducted, is at risk so far as the premises are uninsured and are unoccupied and it is in the interests of the Company and it is creditors and contributories that steps be taken to secure those premises and obtain insurance over them. It is difficult to see how, where Mr Lahood is bankrupt and unable to act as director and where the Trustee's evidence is that he does not wish to be appointed as a director of the Company for reasons that he indicates, the present position could be resolved other than by the appointment of a provisional liquidator. 10For these reasons I am satisfied that I should make an order appointing joint liquidators to the Company, provisionally, as sought by the Trustee. 11I make orders in the form of short minutes of order initialled by me and placed in the file. I also make order 5A that the plaintiff use its best endeavours to serve the originating process, affidavits in support and these orders upon Mr David Lahood. I make order 5B, these orders be entered forthwith. I amend order 6 to insert after the words "relist this matter" the words "including on the application of Mr Lahood or any interested person who may seek to terminate or vary these orders".