FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation, in the matter of W.D. Hall Pty Ltd v W.D. Hall Pty Ltd [2017] FCA 767

ORDERS

THE COURT ORDERS THAT:

1.    WD Hall Pty Ltd be wound up in insolvency under the provisions of the Corporations Act 2001;

2.    Peter Dinoris of Artenis Insolvency be appointed as the liquidator of WD Hall Pty Ltd;

3.    Mr Nogueira have leave, nunc pro tunc, to seek to be appointed as liquidator of WD Hall Pty Ltd;

4.    The plaintiff's costs of the winding up be paid out of the assets of WD Hall Pty Ltd;

5.    The plaintiff's costs of these proceedings are fixed at an amount of $2,805.78;

6.    Mr Nogueira's costs be his costs in the administration as well.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

1    The application, made this morning, is pursuant to ss 459A and 459P of the Corporations Act 2001 for the winding up of WD Hall Pty Ltd, which I will refer to as "the Company". The matter first came before Deputy District Registrar Tredwell, however, as a dispute arose as to the identity of the person to be appointed as liquidator, it was referred to this Court.

2    The first issue is whether the Company ought to be wound up. That was not contested by any party and, indeed, given the large taxation debt owed by the Company to the Deputy Commissioner of Taxation and the Company's failure to comply with a statutory demand in relation to that debt, there is no reason why the Company ought not be wound up in insolvency. The Commissioner has satisfied the Court that all matters required for the making up of the winding up order have been complied with and it is appropriate that the order be made.

3    The real question in dispute between the parties is as to whom, as between two insolvency practitioners, ought to be appointed as liquidator? The liquidator proposed by the Deputy Commissioner of Taxation (the applicant for the winding up order) is Mr Peter Dinoris. On the other hand, Mr Paul Nogueira, who is presently the administrator of the Company, also seeks to be appointed. Each of these persons are well known insolvency practitioners and each are qualified by their standing and experience to be appointed.

4    The facts of this matter are not greatly in dispute and they can be briefly summarised as follows:

(a)    The Company's indebtedness to the Commissioner of Taxation arose in or around July 2011. That liability relates, in part, to unpaid superannuation guarantee charges in respect of superannuation which was payable by the Company. Those charges have continued to accrue since that time. Necessarily interest has also accrued on those amounts. Other amounts are owing to the Commissioner of Taxation arising from the running balance account between the ATO and the Company which, as at 27 January 2017, was in deficit in an amount of $159,176.24. It appears that this indebtedness also arose over an extended period of time.

(b)    A statutory demand was served on the Company by the Deputy Commissioner of Taxation in around late January 2017 for an amount of $174,158.64. It was not complied with and no application was made to set it aside.

(c)    On 24 March 2017, the Deputy Commissioner of Taxation filed an application for the winding up of the Company which was returnable on 5 May 2017.

(d)    On the return of the application on 5 May 2017 the application was adjourned until 9 June 2017 by reason of the Deputy Commissioner of Taxation not proceeding against tax payers who may have been affected by a recent cyclone event in the area where the Company undertook business.

(e)    On 8 June 2017 Mr Nogueira was appointed as the administrator of the Company.

(f)    On 9 June 2017 the adjourned application came back to the Court for further hearing but it was adjourned by reason of the Company having been placed into administration.

(g)    An initial meeting of creditors was held by the administrator. Since then no Deed of Company Arrangement has materialised. Nevertheless, in the two week period since the administration commenced until this hearing some work has been done by the administrator to fulfill the statutory obligations.

Consideration

5    The Commissioner relied upon certain "guiding principles" in relation to the appointment of liquidators as were set out by Barrett J in Workers Compensation Nominal Insurer v Denny Earthmoving & Bulk Haulage Pty Ltd [2008] NSWSC 1167 at [10], [11] and [12]:

10    Three guiding principles come into play here. First, liquidators must be independent and have the appearance of independence so that the Court must judge, in the words of Santow J in Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230:

"... whether there would be a reasonable apprehension by any creditor of lack of impartiality on the liquidator's part in the circumstances, by reason of prior association with the Company or those associated with it, including creditors or indeed any other circumstances".

11    Second, there is the matter referred to by Hodgson J in Unifor Office Systems Australia Pty Ltd v Brewer Partnership Pty Ltd [1999] NSWSC 137:

"This Court, in winding up proceedings, has acted on a general principle that liquidators should not be chosen by the directors or other principals of the Company. It is considered to be in the interests of creditors that someone entirely independent undertake that role. …"

12    Third, there is the obvious point that, all other things being equal, the court will select an option that is likely to involve less cost.

6    There is nothing in the observations of Barrett J which might suggest that his Honour was seeking to confine the unfettered discretion of the Court in the appointment of a liquidator. His Honour was merely identifying some general guiding principles which assist the exercise of the discretion in most applications of this type. However, of the matters referred to by Barrett J, it is noted that one which is most often repeated is that the person to be appointed must not only be independent of the Company but must be seen to be independent. In this context reference should be made to National Safety Council of Australia, Victorian Div [1990] VR 29 and Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612. That said, there are of course circumstances in which the Court, in the exercise of its discretion, might appoint a person who is not wholly independent. See for instance Re Australia National Finance Ltd (1992) 7 WAR 131.

7    In her careful submissions to the Court on behalf of the Deputy Commissioner of Taxation, Ms Foley identified a number of significant factors which ought to weigh in the Court's consideration:

(a)    First, Ms Foley mentioned the issue of the prior association between Mr Nogueira and the Company. This arises because Mr Nogueira acted as the administrator of the Company. It would certainly not be the case that the mere fact that a person acted as an administrator of a Company would prevent them from being appointed as its liquidator. Indeed, as Mr Coulson for Mr Nogueira identified, cost savings can be made by having a person, already familiar with the affairs of a company, appointed as its liquidator. Nevertheless, in the present case there is very little information before the Court as to the exact nature of the relationship between Mr Nogueira and the director of the Company. In Mr Nogueira's "consent of liquidator/provisional liquidator" he has indicated that he is not aware of any conflict of interest or duty that would make it improper for him to act as a liquidator of the Company. Whilst it must be accepted that this is his view, the absence of any information whatsoever as to how he became appointed as the administrator is not irrelevant to the consideration of the Court.

(b)    Secondly, Ms Foley submitted that since 30 March 2017 there has been in existence a consent by Mr Dinoris to act as a liquidator and there is no evidence of any suggestion by any party that he was not appropriate to fulfil that role. Indeed, nothing has been said which suggests that Mr Dinoris would be unsuitable in any way to act as liquidator. Mr Nogueira's submission appears to be simply that Mr Dinoris is less suitable for the position than himself.

(c)    Thirdly, Ms Foley submitted that the costs which might be saved if Mr Nogueira was appointed as opposed to Mr Dinoris are minimal. There is force in this submission in that in Mr Nogueira's affidavit he has identified the work which has been done by him (or his associates) and there is little of that work which would not be recorded and available for use by any subsequently appointed liquidator. Mr Coulson was not able to point to any further meetings or interactions which might have elucidated the position of the Company to Mr Nogueira and which could be identified as decisive. In this matter there appears to be very little or no business which was carried on under the administration. It is not a case where the administrator might have obtained specialised knowledge of an intricate business in the course of the administration such as would warrant his appointment as the liquidator.

(d)    Fourthly, Ms Foley submitted that the Deputy Commissioner of Taxation, who is the major creditor of the Company and who has brought the application for winding up, desires Mr Dinoris to be appointed as the liquidator. The material shows that the debts claimed by the Commissioner total some $174,000. Other unsecured creditors total around $36,000. Westpac Banking Corporation is a secured creditor for an amount of around $400,000 with its security having been attributed an estimated value of $325,000. That said, there is no doubt that the Commissioner of Taxation has a greater financial interest in the administration of the Company than any other creditor. There can be no suggestion that the Court simply acts upon the will of the major creditor in deciding the identity of the liquidator. The interests of all unsecured creditors must be taken into account. Overall, the question is, what is in the interests of the winding up of the Company? However, within that consideration the desires of the major creditors would not be insignificant. It might be even more significant in circumstances where the major creditor is owed amounts substantially in excess of the combined total of the debts of the other creditors as is the present case.

(e)    Fifthly, Ms Foley submitted that the ongoing costs of the liquidation under Mr Dinoris would be less than those under Mr Nogueira. The evidence before the Court shows that the “charge out” rates for Mr Dinoris and his staff are not insubstantially less than those of Mr Nogueira's. That is certainly a relevant consideration which is to be taken into account, but it is difficult to give it too much weight, in circumstances where the extent of the work to be done is unclear.

(f)    Finally Ms Foley also raised the proposition that the appointment of the administrators late in the proceedings is important and it raises suspicions in relation to his appointment. There is some merit in this proposition. It appears that the Company was in financial difficulty for a long period of time prior to the application for winding up. No reason is given as to why the administration was not sought to be commenced earlier but was only commenced after winding up proceedings had been commenced. I agree that these circumstances do warrant some explanation as it has the potential to give rise to the concern that the appointment of administrators was not done for bona fide reasons. That concern can only be heightened by the fact that no proposed deed of Company arrangement has materialised during the administration.

8    Mr Coulson made a number of submissions on behalf of Mr Nogueira and I mean no disrespect if I focus on the main ones. He submitted, on the authority of Re Obie (1983) 8 ACLR 339, that the court's discretion in relation to the appointment of liquidators is unfettered. Master Lee (subsequently Lee J of the Supreme Court of Queensland) in that matter rejected the notion that, as a general proposition, a creditor's nomination of liquidators ought to take preference over those nominated by the Company. It is impossible to disagree with that conclusion. Master Lee there identified that the guiding principle must be what would be consistent with the overall best interests of the winding up including the interests of the creditors in general. Again, his Honour's propositions cannot be caviled with.

9    Mr Coulson also submitted that there is not the slightest suggestion of impropriety made against Mr Nogueira. I accept that submission and there is nothing on the material which would suggest it in any way. However, as indicated, there is also no material before the Court as to the nature of the relationship between Mr Nogueira and the Company prior to his appointment as administrator. Whilst that information might not always be necessary, in this case where the administration occurred after the winding up application was filed some evidence would have been useful.

10    Mr Coulson pointed to the fact that Mr Nogueira is familiar with the Company given that he, by his staff, has undertaken a number of actions in relation to the Company since his appointment as administrator. That work is set out in Mr Nogueira's affidavit and it does not need to be repeated. It suffices to mention, however, that much of the investigative work which has been undertaken will have been recorded and those records will be available to any new liquidator. There is, little in the work done which would suggest that any significant waste would occur were it to be the case that Mr Nogueira was not appointed as the liquidator.

11    Mr Coulson also points to the fact that Mr Nogueira has taken an objective approach to considering the position of the directors of the Company. Again, there is force in Mr Coulson's submission. He refers to investigations as to insolvent trading which are, as yet, incomplete. He also refers to the identification of a liability of the director of the Company in an amount of $66,000. These submissions seem to be advanced in order to establish Mr Nogueira's objectivity.

12    Mr Coulson also referred to the fact that much of the work done by Mr Nogueira in ascertaining the status of the Company and potential claims is the work that would be required of a liquidator in any event. He submits that this would have the effect that Mr Nogueira's appointment as liquidator would render the administration of any liquidation less expensive. There is some merit in that submission, although it is mitigated by the fact that most of the investigations have been recorded in writing and would be available to any person who might be appointed. It should be noted, however, to date no report by the administrator has been prepared in relation to the position of the Company.

Conclusion

13    In this matter the submissions for the respective parties are finely balanced. The issue of the potential savings of costs for the administration if Mr Nogueira is appointed is substantial. On the other hand, the wishes of the Deputy Commissioner as the largest creditor need to be given weight. For these reasons and for the reasons mentioned in my consideration of the submissions of each party, the balance weighs slightly in favour of appointing Mr Dinoris as the liquidator. This is particularly so in circumstances where there is an absence of any evidence as to the nature of the prior relationship between Mr Nogueira and the directors of the Company. Although, it should be emphasised that that is not the only reason.

14    I make the following orders:

1.    That WD Hall Pty Ltd be wound up in insolvency under the provisions of the Corporations Act 2001;

2.    That Peter Dinoris of Artenis Insolvency be appointed as the liquidator of WD Hall Pty Ltd;

3.    Mr Nogueira have leave, nunc pro tunc, to seek to be appointed as liquidator of WD Hall Pty Ltd;

4.    That the plaintiff's costs of the winding up be paid out of the assets of WD Hall Pty Ltd;

5.    The plaintiff's costs of these proceedings are fixed at an amount of $2,805.78;

6.    Mr Nogueira's costs be his costs in the administration as well.

Associate:

Dated:    23 June 2017