Supreme Court New South Wales Medium Neutral Citation: In the matter of Adscaff Pty Limited [2013] NSWSC 1081 Hearing dates: Monday 8 July 2013 Decision date: 08 July 2013 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Order approving compromise pursuant to Corporations Act s 477(2A) and s (2B). Declare pursuant to Corporations Act s 1322(4)(a) that the deed of 31 January 2013 comprised in annexure H to the affidavit of Peter William Marsden sworn 30 May 2013 is not invalid by reason of any prior failure to obtain the approval of the Court pursuant to Corporations Act s 477(2A) and s (2B). Catchwords: CORPORATIONS - external administration - judicial advice to liquidator - liquidator proposes to enter into deed of compromise with creditor - whether court should approve deed of compromise Legislation Cited: (Cth) Corporations Act 2001, s 477, s 1322 Cases Cited: Re Mineral Securities Australia Ltd (In Liquidation) [1973] 2 NSWLR 207 Category: Principal judgment Parties: Peter William Marsden, in his capacity as liquidator of Adscaff Pty Limited (first plaintiff) Adscaff Pty Limited (in liquidation) ACN 088 749 400 (second plaintiff) Representation: Counsel: Mr A Kaufman (plaintiffs) Solicitors: Woods & Day (plaintiffs) File Number(s): 2013/ 184869 Judgment (Ex tempore) 1HIS HONOUR: By originating process filed on 17 June 2013, the first plaintiff Peter William Marsden in his capacity as liquidator of the second plaintiff Adscaff Pty Limited seeks orders pursuant to (Cth) Corporations Act 2001, s 477(2A) and s (2B) to the effect that the Court approve a compromise by the liquidator of a debt owed to the company by Wyndham Holdings Pty Limited on the terms of a deed of release and settlement dated 31 January 2013. The debt in question exceeds $100,000 and the obligations of payment under the deed may be discharged more than three months after the deed was entered into. Against the possibility that the deed, approval for which was not sought prior to its being entered into, being invalid on that account, the liquidator seeks an order pursuant to Corporations Act, s 1322(4)(a), confirming its validity. 2The liquidator was appointed by order of the Federal Court of Australia on 9 November 2011. From his investigation of the financial affairs of the company, he learnt of a debt owed to the company by Wyndham amounting to some $110,738.37, and demanded payment of that debt from Wyndham. Wyndham responded to the effect that if the debt were pursued it would be placed into administration and the likely dividend to unsecured creditors would be 14 cents in the dollar. On that basis, Wyndham offered to pay $7,500 in satisfaction of the debt. Negotiations ensued between solicitors for Wyndham and solicitors for the liquidator, and ultimately Wyndham offered to pay $20,000 in satisfaction of the debt, which the liquidator accepted. The deed having been entered into between them on 31 January 2013, the settlement sum was paid into the liquidator's trust account on 7 and 8 February 2013. 3On 4 March 2013 the liquidator reported to creditors and gave notice of a meeting to seek the creditors' approval of the compromise. Such meeting took place on 19 March 2013, and the majority creditor, the Deputy Commissioner of Taxation, opposed the compromise. The Commissioner has not clearly articulated his rationale for opposing the compromise, save to observe that he would prefer that Wyndham be wound up. When notified of the present application, the Commissioner responded that although not satisfied that he should consent, he did not propose to participate in the proceedings and therefore neither consented to nor opposed the relief sought. 4Based on the analysis provided by Wyndham's solicitors to the liquidator on 16 August 2012, there is at least a reasonable basis for supposing that the dividend in a winding up of Wyndham for unsecured creditors might be in the order of 14 cents in the dollar. The negotiated amount is significantly better than that, and also avoids the further costs and delay that would be incurred by having to litigate the claim. The liquidator is not in funds to bring any proceedings against Wyndham. 5In those circumstances, there is no reason to doubt that the liquidator's view, that this is an appropriate commercial compromise, is a commercially realistic and sensible one. There is nothing to suggest any such lack of good faith, error in law or principle or real or substantial ground for doubting the liquidator's proposal as referred to in Re Mineral Securities Australia Ltd (In Liquidation) [1973] 2 NSWLR 207. 6I make order 1 in the originating process dated 31 May 2013. I declare pursuant to Corporations Act s 1322(4)(a) that the deed of 31 January 2013 comprised in annexure H to the affidavit of Peter William Marsden sworn 30 May 2013 is not invalid by reason of any prior failure to obtain the approval of the Court pursuant to Corporations Act s 477(2A) and (2B). In circumstances where the principal obligation in the deed has now been performed, there is no need to be troubled by any concerns arising from the possibility that the agreement might be performed more than three months after it was entered into. 7I order the costs of this application be costs in the winding up. ********** 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. Decision last updated: 14 August 2013