Supreme Court New South Wales Medium Neutral Citation: In the matter of Coogee Sports Club Ltd [2016] NSWSC 817 Hearing dates: 16 June 2016 Decision date: 16 June 2016 Jurisdiction: Equity - Duty List Before: Stevenson J Decision: Receiver appointed Catchwords: CLUBS AND ASSOCIATIONS - disharmony between directors – Club's bank account frozen evidently at instigation of director – Club unable to pay outstanding creditors – whether receiver should be appointed; EQUITY – receivers – appointment of receivers – whether extraordinary circumstances shown – whether notice should be given to creditors Legislation Cited: Corporations Act 2001 (Cth) Registered Clubs Act 1976 (NSW) Supreme Court Act 1970 (NSW) Cases Cited: Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) I ACSR 445 Commonwealth v ABC2 Group Pty Ltd [2008] NSWSC 1383; 69 ACSR 227 Correa Whittingham [2013] NSWCA 263 Category: Procedural and other rulings Parties: Coogee Sports Club Ltd (Plaintiff) Representation: Counsel: S A Wells (Plaintiff) Solicitors: Eastern Commercial Lawyers (Plaintiff) File Number(s): SC 2016/183488 EX TEMPORE Judgment (REVISED) 1. The plaintiff, Coogee Sports Club Ltd, which I will call "the Club", seeks an order under s 67 of the Supreme Court Act 1970 (NSW) appointing a receiver to itself. 2. The Club is an unlisted non-profit public company limited by guarantee. It was incorporated in 1948. Its object is to, amongst other things, take over and assume the assets of the Coogee Bowling Club and to promote the game of bowls and such other games and recreations as it considers expedient for the benefit of its members. It currently has something in the order of 226 members. 3. The Club's constitution requires that it have five ordinary directors and provides that a quorum for a board meeting is four directors. 4. The directors are currently Ms Suzanne Ghobrial, Mr Bruce Graham, Mr Laki Konistis, Mr John Taylor and Mr Joseph McCurry. Mr McCurry was also, until 12 May 2016, treasurer of the Club. 5. A schism has evidently developed between Mr McCurry, on the one hand, and the other four directors on the other. The background to that difficulty is outlined in an affidavit sworn in these proceedings by the current chief executive officer and secretary of the Club, Mr David Yole. It is unnecessary that I set out those details in these reasons. 6. On or about 19 April 2016, the Club received a notice dated 1 April 2016 from two Club members purporting to requisition a general meeting of the Club within 21 days to remove those four other directors. The Club received advice that that requisition was invalid by reason of s 203D of the Corporations Act 2001 (Cth) and r 35.1 of the Club's constitution. 7. On 12 May 2016, the board resolved by majority to remove Mr McCurry as treasurer and to revoke his authority as a signatory to the Club's bank accounts. Mr McCurry, nonetheless, remained and remains one of the five directors of the Club. 8. On 13 May 2016, Mr Yole and the Assistant Manager of the Club, Mr Brett Griffin, informed the Club's bankers, the Commonwealth Bank of Australia at Coogee, that Mr McCurry was no longer the Club's treasurer, or a signatory to the account 9. On or about 18 May 2016, Mr Yole was told that some cheques drawn on the Club's account at the CBA in favour of the Club's suppliers had been dishonoured. On the same day, Mr Griffin attended at the Coogee CBA and was shown a note on CBA's computer screen saying something to the effect that the Club's accounts had been frozen "due to" (these are the words in Mr Yole's affidavit) "Mr McCurry". 10. Subsequently, the Club informed the CBA, via correspondence sent by its solicitor, that Mr McCurry was not authorised to approach the bank to freeze the accounts on the Club's behalf (if, in fact, that is what he did), or to make any other representations on behalf of the Club to the bank. 11. Nonetheless, he was informed by an officer of the bank that "the bank will not be lifting the freeze on the Club's accounts until all directors have signed off to the CBA's satisfaction, that the dispute has been resolved". 12. What CBA thought "the dispute" was is not clear from the evidence. 13. In the meantime, on or about 26 May 2016, some Club members were served with another notice of general meeting, this time, one to take place this coming Sunday, 19 June 2016. According to that notice, the matter on the agenda is the removal of all of the directors of the Club other than Mr McCurry. The notice does not propose that anyone be appointed in lieu of the four directors proposed to be removed. The result would be that the Club would not have the number of directors required by its constitution. 14. On 7 June 2016, a board meeting of the Club was convened. Mr McCurry was given notice of the meeting but did not attend. The remaining directors resolved that, "[i]n the opinion of the directors [the Club] is insolvent, or is likely to become insolvent, at some future time", and, "[s]ubject to the approval of the Independent Liquor and Gaming Authority Mr Gregory J Parker, Registered Liquidator, to be appointed as Administrator of [the Club]". 15. The approval of the Independent Liquor and Gaming Authority ("the Authority") is required by reason of s 41 of the Registered Clubs Act 1976 (NSW), which is in the following terms: "(1) A Person is not capable of being appointed to act in the capacity of the administrator, the controller of property, the official manager, the receiver or manager, a member of the committee of management, the liquidator or the special manager of a registered club that is a company within the meaning of the Corporations Act 2001 of the Commonwealth or a co-operative registered under the Co-operatives National Law (NSW) or of acting in any such capacity unless the person has been: (a) appointed to act in that capacity by the Supreme Court, or (b) approved to act in that capacity by the Authority." 1. The resolution was expressed in the manner I have set out by reason of the decision of the Court of Appeal in Correa v Whittingham [2013] NSWCA 263 per Gleeson JA (with whom Barrett JA and Tobias AJA relevantly agreed) at [77] to [79]. 2. The Authority is not able to, or, at least, will not consider whether to grant the approval under s 41 of the Registered Clubs Act until 29 June 2016. 3. In the meantime, the Club's financial position is as follows. It has access to approximately $20,000 held in an account at the Bank of Sydney. It has a term deposit at CBA of something in the order of $345,000 and a business transaction account with a credit of $23,000. However, it is not able to access those accounts because the CBA has frozen the accounts in the circumstances to which I have referred. On the other hand, it has some $73,000 outstanding to creditors who require immediate payment. One of those creditors is an electricity supplier that is threatening to disconnect power to the Club. 4. In those circumstances and, in particular, because of the delay which will occur before the Authority will consider the matter, a further board meeting was convened on 15 June 2016. Again, Mr McCurry was given notice of that meeting and did not attend. On that occasion, the board resolved that steps be taken to approach this Court to seek the appointment of a receiver. 5. Mr Parker is a registered official liquidator and has consented to being appointed as receiver. 6. Usually, the Court will not appoint a receiver on the ex parte application of the company concerned except in the case of an emergency, in extraordinary circumstances, or where satisfied that the creditors, "or at least a very substantial body of them" support the application: see Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) I ACSR 445 per Kaye, Murphy and Brooking JJ at 457 and 470 and Commonwealth v ABC2 Group Pty Ltd [2008] NSWSC 1383; 69 ACSR 227 per Barrett J (as his Honour then was) at [28]. 7. However, I am satisfied that this is an extraordinary case and that the Club is facing an emergency. It cannot pay its creditors. The electricity supply is under threat to the Club, amongst other potential problems. There is a prospect that its members may pass a resolution resulting in the Club only having one director and thus being unable to function. 8. There is no evidence before me that the Club's creditors consent to the appointment of the receiver. However, one of the objects of the proposed appointment is that the receiver open a bank account in his name and call on the CBA to transfer the funds it is holding on the Club's behalf to him so that he can cause creditors to be paid. It is safe, therefore, for me to assume that those creditors would consent to the appointment because it would result in their payment. 9. There are other trade creditors of the Club, but there are no secured creditors. 10. It appears to me that there is a very real prospect that the receiver's appointment will be only for a short term and, I would hope, only until the Authority considers what it should do in relation to the Club's position on 29 June 2016. 11. In those circumstances, I propose to make the orders sought but to bring the matter back before the Duty Judge on 1 July 2016, so that the Duty Judge may consider the matter in light of what the Authority has done on 29 June 2016 and whether the receiver's appointment should be revoked. 12. Upon the Club giving to the Court the usual undertaking as to damages, I make the following orders: 1. That Mr Gregory Jay Parker be appointed receiver of the plaintiff and all of its property and undertakings pursuant to s 67 of the Supreme Court Act 1970 (NSW), or, alternatively, s 41 of the Registered Clubs Act 1976 (NSW) up to and including 5 August 2016. 2. That the receiver have the powers set out in s 420 of the Corporations Act 2001 (Cth). 3. That the proceedings be listed before the Duty Judge at 10am on 1 July 2016. 4. I direct that the solicitors for the Club notify the CBA, the Bank of Sydney and the Club's trade creditors, of the making of these orders as soon as possible and, in any event, by no later than 5pm tomorrow. 5. I note that the Club will also notify its members of the making of these orders. 6. I grant liberty to apply on short notice to any person, or body that considers they are adversely affected by the making of these orders. 7. I order that these orders be taken out forthwith. ********** 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: 17 June 2016