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Park v B McDonald (No 2) Pty Ltd

 

[2013] QSC 252

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

John Park & Kelly Anne Trenfield as liquidators of MCG Resources Pty Ltd (in liq) v B. McDonald (No 2) Pty Ltd & Ors [2013] QSC 252

PARTIES:

JOHN PARK & KELLY ANNE TRENFIELD AS LIQUIDATORS OF MCG RESOURCES PTY LTD (IN LIQUIDATION)

ACN 129 717 531

(applicant)

v

B. MCDONALD (NO 2) PTY LTD

ACN 129 526 692

(first respondent)

and

BARRAIGH PTY LTD

ACN 145 433 272

(second respondent)

and

MOSMAN SERVICES PTY LTD

ACN 079 350 744

(third respondent)

FILE NO/S:

BS 1149 of 2011

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

18 September 2013

DELIVERED AT:

Brisbane 

HEARING DATE:

17 September 2013

JUDGE:

Philip McMurdo J

ORDERS:

  1. The applicants as liquidators of MCG Resources Pty Ltd (in liquidation) ACN 129 717 531 are directed and authorised pursuant to s 479(3) of the Corporations Act 2001 (Cth) to make the following payments:

B. McDonald (No 2) Pty Ltd ……$10 million

Barraigh Pty Ltd ………………. $5 million

Mosman Services Pty Ltd ……... $5 million

  1. The applicants as liquidators of MCG Resources Pty Ltd (in liquidation) ACN 129 717 531 are directed and authorised pursuant to s 479(3) to pay a final dividend (if any) in the winding up of MCG Resources Pty Ltd (in liquidation) to MCG Group Pty Ltd, Charmaine McDonald, MCG Drilling Pty Ltd and MCG Civil Pty Ltd.

CATCHWORDS:

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – APPLICATIONS TO COURT FOR DIRECTIONS OR ADVICE – where company being voluntarily wound up – where liquidators of company applies to court for directions pursuant to s 479(3) of the Corporations Act 2001 (Cth) to allow them to make payments to shareholders and creditors – where liquidators also seek order allowing them to dispense with requirements under regulations 5.6.65(1)(a) and (b) of the Corporations Regulations 2001 (Cth) – whether court should grant directions sought – whether court has power to order dispensation with requirements under regulations 5.6.65(1)(a) and (b)

Corporations Act 2001 (Cth), s 477(1)(c), s 477(2)(m), s 479(3)

Corporations Regulations 2001 (Cth), reg 5.6.65(1)

Re Emu Brewery Mezzanine Ltd (in liq) [2009] FCA 1213, considered

Re One.Tel Ltd [2002] NSWSC 1081, considered

COUNSEL:

S Cooper for the applicant

M Martin for the first respondent

G Handran for the second and third respondents

SOLICITORS:

Holding Redlich for the applicant

Mills Oakley for the first respondent

Tucker & Cowen for the second and third respondents

  1. The liquidators of MCG Resources Pty Ltd (in liquidation) (“the Company”) have applied for directions pursuant to s 479(3) of the Corporations Act 2001 (Cth) so that they may make certain payments to shareholders and creditors.  The respondents are the three shareholders of the Company and agree to the directions which are sought. 
  1. The Company was wound up by an order of this court made on 1 March 2011. The order was made upon the just and equitable ground. Each of the shareholders had one representative on the board of directors. The first respondent, which according to the register held 50 per cent of the shares, was at odds with the other respondents which each held 25 per cent of the shares.
  1. The Company was and remains solvent. It has not carried on business. Its principal asset was a parcel of shares in MCG Coal Holdings Pty Ltd, which in turn held shares in MCG Coal Pty Ltd which owned a valuable mining tenement. In May last year, the liquidators sold the Company’s shares in MCG Coal Holdings Pty Ltd to an unrelated third party for a price of $30 million. That resulted in the Company incurring a liability for capital gains tax of $8,113,836, which the liquidators paid in June this year.
  1. Apart from that liability for CGT, the company had only a small number of creditors who were unrelated to any of its shareholders. The liquidators rejected a small part of the claim of one of those creditors and otherwise admitted their proofs. The amount admitted, totalling about $40,000, has been paid. No appeal has been filed in respect of that partial rejection.
  1. Other proofs of debt were lodged by a number of companies and an individual, all related to the first respondent, totalling about $6.6 million (“the related creditors”). The liquidators have admitted, in total, about $4.3 million of those proofs. Most of the related creditors brought proceedings in the Federal Court to challenge the decisions of the liquidators with respect to their proofs.
  1. There are a number of proceedings between, broadly speaking, the interests of the first respondent and those of the second and third respondents. All relevant parties have agreed to the settlement of those proceedings. They include the proceedings in the Federal Court to which I have referred. This settlement is recorded in a Deed of Settlement dated 26 August 2013. Relevantly for the present application for directions, it has been agreed between the liquidators, the respondent shareholders and the related creditors that the funds presently held by the liquidators will be paid out in certain amounts and in a certain sequence.
  1. As matters presently stand, the liquidators hold cash in an amount of approximately $21.47 million. It is a term of the Deed of Settlement that the liquidators will pay what it defines as the Agreed Dividend, meaning payments totalling $20 million, to be paid as to $10 million to the first respondent and as to $5 million to each of the second and third respondents. This corresponds with their shareholding according to the register. It should be noted that one of the proceedings to be compromised by the Deed of Settlement is that brought by the present first respondent against the present second and third respondents and the liquidators, which is 10970/12 in this court. In that case, the present first respondent sought a declaration that, contrary to the state of the register of members, its entitlement was to 80 per cent of the issued shares in the Company with the other respondents being entitled to the remaining 20 per cent.
  1. After payment of the Agreed Dividend, the liquidators propose to declare a final dividend in respect of the related creditors to the extent that their debts have been admitted. Of course there would not be sufficient to pay the full amounts which have been admitted. But it is a further term of the Deed of Settlement that the admitted proofs need be paid only to the extent of the balance of the assets of the Company which remains after payment of the Agreed Dividend and the costs and expenses of the liquidation. The related creditors have thereby agreed to compromise their entitlement to the admitted parts of their proofs.
  1. Under s 477(1)(c), a liquidator of a company may make any arrangement with creditors.  The provisions within the Deed of Settlement, whereby the related party creditors consent to priority being given to the Agreed Dividend, are an arrangement within that provision.  Further, there is the wide power conferred upon a liquidator by s 477(2)(m), namely to do all such things as are necessary for winding up the affairs of the company and distributing its property.  Therefore the proposed payments by the liquidators, and their agreement to pay them according to the Deed of Settlement, are within the liquidators’ powers.  In the circumstances where all interested parties have agreed in terms of the Deed of Settlement, with the beneficial consequence of the resolution of much litigation, it is appropriate that the liquidators be given the directions which they seek.
  1. Therefore, there will be an order that the applicants as liquidators of the Company be directed and authorised pursuant to s 479(3) of the Corporations Act to make the following payments:

B. McDonald (No 2) Pty Ltd ………$10 million

Barraigh Pty Ltd …………………… $5 million

Mosman Services Pty Ltd …………. $5 million

  1. It will be further ordered that the applicants as liquidators of the Company be directed and authorised pursuant to s 479(3) to pay a final dividend (if any) in the winding up of the Company to MCG Group Pty Ltd, Charmaine McDonald, MCG Drilling Pty Ltd and MCG Civil Pty Ltd. 
  1. The liquidators seek a further order in relation to the operation of regulations 5.6.65(1)(a) and (b) of the Corporations Regulations 2001 (Cth) upon the payment of any dividend to those related creditors.  Regulation 5.6.65 provides as follows:

5.6.65Liquidator to give notice of intention to declare a dividend

(1)The liquidator must give notice of his or her intention to declare a dividend not more than 2 months before the intended date:

(a)by lodging a notice with ASIC in accordance with subregulation 5.6.75(4); and

(b)in writing, in accordance with Form 547 or, for a final dividend, in accordance with Form 548, to any person whose debt or claim has not been admitted and who:

(i)for a winding up by the Court--is shown as a creditor in the report on the affairs of the company under subsection 475(1) of the Act; or

(2)A notice in accordance with subregulation (1) must specify a date, not less than 21 days after the date of the notice, on or before which formal proof, in accordance with Form 535 or 536, of a debt or claim must be submitted to participate in the distribution.

(2A)Also, the notice must state at least the following information:

(a)the name of the company;

(b)any trading name of the company;

(c)the ACN of the company.

(3)Subject to regulation 5.6.68, a person:

(a)who claims to be a creditor; and

(b)who does not submit a formal proof of a debt or claim on or before the date specified in the notice given under subregulation (1);

is excluded from participating in the distribution to which that notice relates.”

  1. I am not persuaded that there is a power, in this court at least, to dispense with compliance with this regulation, to the extent that it does apply here. But its application is more limited than was suggested in the submissions. This is because a notice in Form 548 need be given only to a person whose debt or claim has not been admitted. Each of the related creditors has lodged a proof which has, at least in part, been admitted. The fact that not all of the proof was admitted does not make that person one to whom a notice is to be given under the regulation. Were it otherwise, that person could lodge a further proof which again would have to be considered by the liquidators but this time under regulation 5.6.66. But that process must follow that under which the original proof was considered by the liquidators.[1] 
  1. Therefore, the operation of the regulation in the present case would require the liquidators only to lodge a notice with the Australian Securities and Investments Commission.
  1. There is no provision of the Corporations Act or the Corporations Regulations which provides a power to exempt a liquidator from compliance with this regulation.  The present question, of course, is whether there is a power to direct that the regulation need not be complied with, rather than the effect or otherwise of something which has been done in non-compliance with that provision.  Counsel referred to two occasions in which a judge of the Federal Court has made an order as is sought here.  In one case, the power was assumed without identification of its source.[2]  The other involved a related proceeding to the present one, in which that judge was persuaded that the order could be made according to the general powers under s 23 of the Federal Court of Australia Act 1976 (Cth).  It was suggested that in this court, there would be a power to affect the operation of the Corporations Regulations by an order made under r 658 of the Uniform Civil Procedure Rules 1999 (Qld) or s 244(9) of the Supreme Court Act 1995 (Qld).  I am unpersuaded that either of those provisions provides the requisite power. 
  1. An order which provided relief from compliance with this regulation was made by Barrett J (as he then was) in Re One.Tel Ltd.[3]  In that case, the source of the power was found in s 447A of the Corporations Act which, as Barrett J explained, applied to that winding up because it resulted from a resolution of creditors under s 439C(c) under a Part 5.3A administration.  Significantly, Barrett J suggested no alternative source of the power. 
  1. Therefore, no order will be made in relation to regulation 5.6.65. There will be directions under s 479 in the terms set out above.

Footnotes

[1] Regulation 5.6.64.

[2] Re Emu Brewery Mezzanine Ltd (in liq) [2009] FCA 1213 at [12].

[3] [2002] NSWSC 1081.

Close

Editorial Notes

  • Published Case Name:

    John Park & Kelly Anne Trenfield as liquidators of MCG Resources Pty Ltd (in liq) v B McDonald (No 2) Pty Ltd & Ors

  • Shortened Case Name:

    Park v B McDonald (No 2) Pty Ltd

  • MNC:

    [2013] QSC 252

  • Court:

    QSC

  • Judge(s):

    McMurdo J

  • Date:

    18 Sep 2013

Litigation History

No Litigation History

Appeal Status

No Status