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  • Unreported Judgment

Re Pacific Property Strategies Pty Ltd

 

[2010] QSC 487

 

 

SUPREME COURT OF QUEENSLAND

 

CIVIL JURISDICTION

 

FRYBERG J

 

No 12585 of 2010

 

RE:  PACIFIC PROPERTY STRATEGIES PTY LTD

 

BRISBANE 

 

..DATE 08/12/2010

 

ORDER

 


HIS HONOUR:  This is an application for the winding-up of Pacific Property Strategies Pty Ltd, which I shall call the company.

 

The company incorporated as a joint venture vehicle to carry out a property transaction on behalf of the present applicant, Mr Comer, and the second respondent, Mr Limbach, or, more accurately, on behalf of them or their corporate creatures.

 

It carried out the venture and it made a profit of a considerable amount of money.  That money was left in the joint venture vehicle and has since been dissipated or, at least, it would appear that that is so.  It seems to have gone on loans to the two protagonists or their companies.

 

The ground of the application as filed was that it was just and equitable that the company should be wound up.

 

Shortly before the application was due to be heard, the company procured the appointment of an administrator of its affairs.  That was done by the decision of the second respondent who was the sole director of the company.  Mr Morton was appointed as the administrator.  In the name of the company, he opposes the present application.  So does the second respondent, Mr Limbach. 

 

Mr Morton was appointed pursuant to a resolution of the company to the effect that it was insolvent or that it might in the future become insolvent.

 

Two days after his appointment, he wrote to the creditors.  Presumably in that time he had the opportunity to get some idea of the affairs of the company.  He told the creditors that the company was insolvent.  He does not now suggest that that statement was not correct.

 

I am satisfied, on the evidence, that the company is insolvent.

 

Section 459B of the Corporations Act provides that on an application under section 462 if the Court is satisfied that the company is insolvent, it may order that the company be wound up in insolvency.  The question before me, therefore, becomes should I order the company to be wound up in insolvency.

 

On behalf of the respondents, Mr Nathan submitted first that I should not do so because the proceedings against the company have been statutorily stayed pursuant to section 440D of the Act.  He pointed out that there has been no application by the present applicant for leave to continue the proceedings and submitted that therefore the application cannot be proceeded with.

 

He relied upon the decision of Stone J in Hall v. Mercury Information South Australia Pty Ltd [2002] FCA 272.  His Honour there expressed the view that the appointment of a provisional liquidator as a precursor to a winding-up order was a proceeding against the company and, accordingly, triggered the operation of section 440D.

 

The decision to which Mr Nathan refers is, of course, technically distinguishable on the ground that it was an application for a provisional liquidator rather than the hearing of a winding-up application but I do not think that is a material distinction.

 

If the matter stood there, I would be inclined to follow the decision of Stone J and apply it in the present case.  It seems to me that the wording of section 440D is apt to cover the case and that an application for leave would be necessary if the matter were to proceed.

 

However, the law does not stand simply with that decision.  There have been a number of subsequent decisions dealing with section 440D.  It is sufficient if I refer to those cited to me by Mr Pincus of counsel on behalf of the applicant.  APRA v. Rural and General [2004] 48 ACSR 616; Watts v. Albany Marine Centre Pty Ltd [2006] WASC 22; Evans v. Mullumbimby News Pty Ltd [2008] NSWSC 240; ASIC v. Storm Financial [2009] 71 ACSR 81; and Cory v. Registrar of the Federal Court [2010] FCA 1215.  Those decisions have not followed Stone J's dicta.

 

In my judgment, notwithstanding the view which I might have of the proper interpretation of the section, I should also not take that approach.  The Corporations Act is national legislation.  It is desirable that it receive a uniform interpretation throughout Australia.

 

While the position is technically not governed by what was said in the High Court in Australian Securities Commission v. Marlborough Gold Mines Ltd [1993] 177 CLR 485 at page 492, nor, as far as I am aware, by any other decision of the High Court, as a matter of principle where there is some authority at first instance favouring one interpretation of a national Act and an abundance of authority at first instance to the contrary, I should, whatever my own view, follow the predominant approach.  It might be different if there were competing views which were reasonably evenly balance but that is not the position in this case.

 

The view which has predominated is that there is no scope for applying section 440D in the present situation because of the provisions of section 440A.  I will not attempt an analysis of the arguments since, as I have said, I propose to follow the prevailing opinion without consideration of its merit.

 

In the alternative, Mr Nathan, on behalf of the respondents, submitted that I should adjourn the hearing of the application until 17 January to allow a creditors' meeting to take place.  He submitted that this course was consistent with section 440A.

 

When the matter first came on for hearing two days ago, it appeared that Mr Morton had made some analysis of the company's affairs.  There were, he had said, three creditors; the applicant and his interests, the second respondent and his interests and, for a small amount of money, comparatively, the Commissioner of Taxation.

 

When I observed that section 440A required that there be not only the appointment of an administrator but also the satisfaction of the Court that it was in the interests of the company's creditors for the company to continue under administration rather than be wound up, Mr Nathan sought an adjournment to enable evidence of the interests of the creditors to be obtained. 

 

I granted that adjournment and the result has been a further affidavit from Mr Morton filed by leave today.  That affidavit raises only one matter relevant to the interests of the creditors.  Mr Morton refers to the financial relationship between the company and Mr Limbach, the second respondent's company, Stevco Pty Ltd, the corporation which Mr Limbach used to obtain his loan.  That company is presently in liquidation and Mr Morton is the liquidator.  Presumably, he is familiar with its affairs.

 

Mr Morton has deposed in the affidavit filed today that at the end of the 2009 financial year, Stevco was indebted to the company for some $260,000, whereas at the end of the 2010 financial year, the position had been reversed and the company was indebted to Stevco for over $100,000.  This movement of $376,000 in the affairs between the companies was, Mr Morton suggested, suspicious and needed to be investigated.  The implication seems to be that it may turn out that upon investigation the company is not indebted to Stevco but, rather, has an asset in the form of a debt owed to it by Stevco.

 

Whether or not that is the position is, no doubt, something that ought to be investigated.  However, it does not seem to me to materially alter the financial position of the company.  It is insolvent.

 

There is no evidence to suggest that if the investigation proposed turns up something odd, the financial position of the company will be in any way improved.  Stevco is insolvent as the matter presently stands and I am sure that if it had any capacity to pay the company any substantial amount, Mr Morton would have informed the Court of that.

 

If there is to be some reversal of a movement of over $370,000 in funds in favour of the company, it will be adverse to Stevco.  Stevco's position will be worsened and there will be no prospect of money coming from that source or at least so I infer in the absence of any evidence to the contrary from Mr Morton.

 

I can, therefore, see no benefit to the creditors of the company in adjourning the present application to allow the investigation of the position as between the two companies.  Moreover, I can see potential detriment.

Mr Morton points out that he has the necessary expertise to carry out that investigation, that the appointment of a separate liquidator to the company will be expensive and that he has the necessary independence to be able to carry out the investigation.

 

I would not wish in any way to cast any adverse suggestion about Mr Morton's capacities or integrity.  However, the fact of the matter is that the two companies have conflicting interests and Mr Morton, as administrator of the company, has a potential conflict with his position as liquidator of Stevco.  That is a reason why it is undesirable for the present position to continue.

 

In short, I am not satisfied that it is in the interests of the creditors that the administration should continue rather than that the company be wound up. 

 

I therefore propose, on the evidence, to order that Pacific Property Strategies Pty Ltd be wound up in insolvency.

 

...

 

HIS HONOUR:  There will be an order in accordance with the draft, initialled by me and placed with the papers.

 

...

 

 

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Editorial Notes

  • Published Case Name:

    Pacific Property Strategies Pty Ltd, Re

  • Shortened Case Name:

    Re Pacific Property Strategies Pty Ltd

  • MNC:

    [2010] QSC 487

  • Court:

    QSC

  • Judge(s):

    Fryberg J

  • Date:

    08 Dec 2010

Litigation History

No Litigation History

Appeal Status

No Status