FEDERAL COURT OF AUSTRALIA

Hall v Mercury Information Technology (South Australia) Pty Limited

[2002] FCA 272

GREGORY WINFIELD HALL in his capacity as Receiver & Manager of LAPTOP LAND (NSW) PTY LIMITED (RECEIVER & MANAGER APPOINTED) ACN 052 529 656 v MERCURY INFORMATION TECHNOLOGY (SOUTH AUSTRALIA) PTY LIMITED (Administrator Appointed) ACN 008 100 196 & ORS

N 3008 of 2002

STONE J

18 MARCH 2002

SYDNEY

THE COURT ORDERS THAT:

1. The applicant has leave to proceed with this proceeding against the first and second respondent.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

Background

1                     Laptop Land (NSW) Pty Limited (Receiver and Manager appointed) (“Laptop”) is one of a group of companies known as the Mercury IT Group. Many, if not all, of the fourteen corporate respondents are also members of the Mercury IT Group. The applicant, Mr Gregory Hall, was appointed as receiver and manager of Laptop on 12 February 2002 by Compaq Computers Australia Pty Limited (“Compaq”) pursuant to a deed of charge dated 6 June 1995 between Laptop and Compaq.

2                     On 5 February 2002 Mr Ronald Dean Willcocks and Mr Ian Russell Lock were appointed as joint voluntary administrators of the first respondent, Mercury Information Technology (South Australia) Pty Limited (Administrator Appointed) (“MIT(SA)”). Mr Dean-Willcocks subsequently resigned and Mr Lock is now the sole administrator.  Mr Dean-Willcocks was appointed as voluntary administrator of the second respondent, Mercury Information Technology Pty Limited (Administrator Appointed) (“MIT”) on 19 February 2002.  These administrators were appointed by Mr Derek Merdith who is the sole director of both MIT(SA) and MIT. Mr Merdith is also the sole director of Laptop. Laptop owns 100% of the shares in MIT.

3                     The first meeting of creditors in the administration of MIT(SA) was held on 12 February 2002 and was chaired by Mr Dean-Willcocks. At that meeting Mr Matthew Selley, a lawyer acting on instructions from Compaq, put a motion to the meeting to have the (then) joint administrators removed and replaced by Mr Hall and Mr David Olifent. The motion was lost on a show of hands, two creditors being in favour, seven against and four abstaining. Mr Selley did not seek a poll because, in his words, “Mr Dean-Willcocks explained that from his analysis of the proxies and the proofs of debt it would be impossible for a poll to succeed.”

4                     The first creditors meeting in the administration of MIT was held on 26 February 2002 and was also chaired by Mr Dean-Willcocks. A transcript of an audio tape of that meeting was annexed to the affidavit of Mr Hall sworn on 11 March 2002. It appears from that transcript and from the affidavit of Mr Dean-Willcocks of 12 March 2002, that Mr Hall, representing Laptop, attended that meeting with the intention of moving that Mr Dean-Willcocks be replaced as administrator by Mr Stephen Parberry. As it turned out, Mr Dean-Willcocks did not accept Laptop as a creditor of MIT and thus did not permit Mr Hall to vote on any matter before the meeting or to move any motions. There was no motion to remove Mr Dean-Willcocks as administrator of MIT.

5                     In proceedings N 3006 of 2002 (“Compaq proceeding”), commenced by application filed on 19 February 2002, Compaq Australia Pty Limited sought orders that, inter alia, Mr Dean-Willcocks and Mr Lock be replaced as administrators of MIT (SA) by Mr Hall and Mr Olifent.  In this proceeding, commenced by application filed on 7 March 2002, Mr Hall, as receiver and manager of Laptop seeks orders inter alia, that,:

(a)                he have leave to proceed against each of the first and second respondents; and

(b)               Mr Stephen Parbery be appointed as provisional liquidator of the applicant and each of the fourteen corporate respondents.

Other orders sought go to the winding up of some or all of the corporate respondents and the appointment of Mr Parbery as liquidator.

6                     If Laptop is successful in bringing about the winding up companies in the Mercury IT Group this proceeding would appear to have superseded the Compaq proceeding. Significant issues in this proceeding depend on the applicant having standing to proceed against MIT(SA) and MIT and, for this purpose, if the leave of the Court is required, being given leave to proceed. At a directions hearing on 8 March 2002 the representatives of the applicants in both proceedings and of MIT(SA) and MIT agreed that the question of leave should be decided in advance of the other questions raised in the present application.

Laptop’s standing to bring this proceeding

7                     Laptop’s standing to bring this proceeding against MIT(SA) and MIT has been challenged on a number of bases. It is submitted that this is a proceeding “against the company” within the meaning of s 440D(1) of the Corporations Act 2001 (Cth) (“Act”) and that because MIT(SA) and MIT are both under administration the leave of the Court is required before the proceeding can continue.

8                     It is also claimed that, in so far as this application seeks an order that MIT(SA) and MIT be wound up in insolvency, Laptop has no standing to bring this proceeding against the MIT(SA) and requires the leave of the Court in relation to MIT. These claims are based on s 459P of  Act and assertions that:

(a)                in relation to MIT(SA), Laptop does not fall within any of the categories of persons listed in s 459P as persons who may make such an application; and

(b)               in relation to MIT, that because Laptop claims as a contributory it requires the leave of the Court under s 459P(2)(b).

Leave under s 440D of the Act

9                     Subject to two exception that are not relevant here, s 440D(1) of the Act provides that:

“During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

(a)       with the administrator’s written consent; or

(b)       with the leave of the Court and in accordance with such terms (if any) as the Court imposes.”

10                  As indicated above, both the MIT(SA) and MIT are under administration. Neither administrator has consented to this proceeding. It follows that, if the proceeding is construed as being “against the company” or in relation to any of the company property, the leave of the Court is required.

11                  The primary submission of counsel for the applicant, Mr Castle, was that the leave of the Court was not required. Mr Castle’s argument was that the application for the appointment of a provisional liquidator was not a proceeding “against the company” but rather a proceeding “in respect of the company”. Mr Castle has adopted the phrase “in respect of the company” as used by Austin J in Young v Sherman [2001] NSWSC 1020 (“Young”). In that case Austin J was concerned with a proceeding to challenge the validity of a deed of company arrangement or to terminate a deed of company arrangement under inter alia ss 445D, 444G and 447A of the Act. In considering whether such a proceeding required the leave of the court under s 440D Austin J stated, at [74]:

“A proceeding to challenge the validity of a deed of company arrangement or to terminate it is not in any substantive sense a proceeding ‘against’ the company. It is better characterised as a proceeding in respect of the company and its affairs, to which it is proper to join the company so that it is bound by the decision. Nor, in my opinion, is such a proceeding one ‘in relation to any of the property of the company ... in such a proceeding no relief is sought with respect to particular property.”

12                  Mr Castle submitted that Young is authority for the proposition that applications under ss 445D, 445G, 447A, 600A and 600B are not applications “against the company” for the purpose of s 440D. I agree with counsel for the first respondent, Mr Coleman, that Young cannot be read so broadly. Austin J was making a far narrower point. His Honour, quite properly in my respectful opinion, confined his discussion to the matter at hand, namely the challenge to the validity, or termination, of a deed of company arrangement stating that:

“It would be undesirable, in my view, to qualify the statutory protection of individual creditors by construing the words ‘against the company or in relation to any of its property’ in ss 440D and 444E(3) so widely that they extend to a proceeding to challenge the validity of a deed of company arrangement or to terminate it.”

13                  Like the application in Young, the present application is quite different from the kind of application commonly given as an example of a proceeding “against” a company to which the prohibition in s 440D is directed. Such examples include an action brought by a former employee of the company seeking reinstatement and other relief (Foxcraft v The Ink Group Pty Ltd (1994) 15 ACSR 203); proceeding seeking reinstatement of a director of the company (Re Capital General Corporation Ltd (2001) 19 ACLC 848) and a proceeding to recover a debt owed by the relevant company; Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514.

14                  The present application, however, is also quite different from the proceeding considered by Austin J in Young. It seeks the appointment of a provisional liquidator as a precursor to an order that the first to fourteenth respondents be wound up and a liquidator appointed to each company. Such an order directly affects the whole of the relevant company’s affairs and assets, taking them out of the control of the directors and vesting control in the liquidator. Ultimately such an order is directed to the dissolution of the company. It is difficult to think of an order that more directly and more comprehensively affects the company. It is difficult to imagine how a proceeding that seeks such an order could be other than a proceeding “against the company”. If this is correct it follows that under s 440D the leave of the Court is required if this application is to proceed against MIT(SA) and MIT. As I propose, however, in exercise of my discretion under s 440D, to grant the applicant leave to proceed it is not necessary for me to consider this issue in the detail that would be required if I were not disposed to grant leave. My reasons for granting leave are set out below.

Standing under s 459P of the Act

15                  Section 459A of the Act provides that, on an application under s 459P, the Court may order that an insolvent company be wound up in insolvency. Section 459P list categories of persons who may apply to the Court for an order under s 459A. Only persons who come with these categories may apply for a company to be wound up in insolvency. Relevantly these categories include,

“(b)     a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor);

(c)        a contributory.”

16                  Laptop purports to have standing in relation to MIT(SA) as a creditor and in relation to MIT as a contributory. Under s 459P(2)(b) a contributory requires the leave of the Court in relation to such an application. This raises discretionary factors that are discussed below; see [21] et seq.

17                   Mr Coleman, counsel for the first respondent, submitted that on the evidence Laptop is not a creditor or prospective creditor of MIT(SA). The relevant evidence is to be found in the affidavits of Mr Lock, the administrator of MIT(SA) and Mr Hall, the receiver and manager of Laptop.  Mr  Lock deposed that he had investigated movements in a loan account conducted between MIT(SA) and Laptop and also cash receipts and payments between them. He annexed to his affidavit two schedules that he prepared detailing debits and credits in the loan account and the cash receipts and payments. Both of those schedules show a balance in excess of $1.7 million in favour of MIT(SA).

18                  In his capacity of receiver and manager of Laptop, Mr Hall prepared a report dated 18 February 2002 for submission to the company’s creditors. That report lists MIT(SA) as indebited to Laptop in the amount of $19,816. In addition, Mr Hall states in his affidavit that he anticipates that,

“when proper accounts are prepared which reflect all proper charges and consideration for the provision of services and the movement of goods and monies within the [Mercury] Group, [Laptop] will be a creditor of each and all of the companies within the Group.”

In his written submissions, Mr Coleman appeared to regard this as in some way casting doubt on the debt listed in Mr Hall’s report. I do not read it in this way. The statement appears only to anticipate that proper accounts may reveal debts owed to Laptop that are not apparent in the present state of the accounts.  

19                  Mr Coleman also submitted that, even accepting that MIT(SA) is indebited to Laptop in the amount of $19,816, Mr Lock’s evidence that Laptop is indebted to MIT(SA) for a much greater amount leads to the conclusion that Laptop is not a creditor or prospective creditor of MIT(SA). The submission appears to presuppose that Mr Lock and Mr Hall cannot both be correct and to assume that the smaller debt would be extinguished by the greater, presumably by the operation of a legal set-off. The submission misconceives the nature of set-off which, in such circumstances, is purely procedural in nature and does not effect an automatic discharge; see Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514 at 518 - 519 per Hutley JA and 522 - 523 per Glass JA. Not only is it legally possible for Laptop to be both debtor and creditor in relation to MIT(SA) but the availability of set-off to MIT(SA) as a defence to a claim by Laptop would depend on there being mutual debts.

20                  As the debt of $19,816 identified by Mr Hall was not otherwise challenged I accept for the purposes of s 459P that  Laptop is a creditor of MIT(SA) and as such has standing under that section to bring this application against that company.

Discretionary considerations

21                  It remains to consider the factors relevant to the exercise my discretion to grant leave to the applicant to continue with this proceeding under s 440D in relation to MIT(SA) and MIT and under s 459P(2) in relation to MIT. 

22                  In relation to the grant of leave under s 459P(2) there is an additional constraint imposed by s 459P(3), which provides that:

“The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise.”

23                  In this case the insolvency requirement has been satisfied by MIT, through its solicitor, Mr Fordyce, conceding that it is insolvent. However, while a prima facie case of insolvency is a necessary condition for the grant of leave, it may not be sufficient; Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 17 ACSR 187 per Lindgren J at 190.

Applicant’s evidence and submissions in relation to the granting of leave

24                  The applicant’s submissions that the Court should exercise its discretion to grant leave under both s 440D and s 459P(3) are based mainly on the allegation that the affairs of the respondent companies are so intermingled that cost and efficiency considerations dictate that   there be a single administration by an independent person who, as provisional liquidator, would regularise the accounts of all the respondent companies. Once that has been done informed decisions could be made about the future of each company. 

25                  In his affidavit of 7 March 2002, Mr Hall refers to some of the difficulties he has experienced in obtaining information about the affairs of Laptop. He states that Laptop had a central role within the Mercury IT Group in that:

·        most of the companies in the Group used its premises at  60 Miller Street North Sydney as their registered office and as their principal place of business;

·        Laptop kept the books and records for all of the companies within the Group except for MIT(SA) and one other company;

·        most, if not all, of the Group’s stock was acquired by Laptop and distributed to other trading companies within the Group. There were two exceptions to this practice one of which was MIT(SA);

·        it acted as treasurer for the Group collecting and distributing money within the Group as required;

·        it paid wages and related costs of employees within the Group with the exception of the employees of four companies including MIT(SA) and MIT.

Despite these extensive services, no charges were made by Laptop. For this reason Mr Hall anticipates that Laptop may be a creditor of most of the companies in the Group once proper accounts were prepared.

26                  Further affidavit evidence was given by Ms Carolyn Rowe, a senior manager with PricewaterhouseCoopers who has been assisting Mr Hall in his work as receiver and manager of Laptop. In her affidavit of 7 March 2002, Ms Rowe identifies some of the difficulties that she has experienced in attempting to gather information about Laptop’s stock, leases and intercompany loans. She referred to the difficulty of identifying stock belonging to Laptop. She was told, for instance, that stock in boxes marked with the name of Laptop had been transferred to other companies within the Group by “internal transfer”. She was told that stock for MIT was ordered by Laptop and transferred by journal entry to MIT after delivery by the suppliers. On sale by MIT the money was banked in MIT’s account but that the bank account was “swept up” and transferred to Laptop. The same pattern occurred with purchases for MIT(SA). The process was similar with other Group companies except that most did not have bank accounts and in such cases the funds were paid directly into the Laptop account.

27                  Ms Rowe also deposed that she had been told that, since June 2000 the Mercury IT Group’s accounts were prepared on a consolidated basis and that to separate the accounts for each entity in the system would be  “a big task”.  She was also told that intercompany loan accounts were dealt with in the same way and that they had not been updated since June 2000. Ms Rowe also stated that no payments had been allocated to Laptop in respect of overheads it had paid and that the loan accounts would show only stock transfers.

28                  Annexed to Ms Rowe’s affidavit are spreadsheets that she prepared setting out Laptop’s expenditure since 1999 from its accounts with the National Australia Bank Limited (“NAB”) and the Australia and New Zealand Banking Group Limited (“ANZ”). In relation to those spreadsheets Ms Rowe made the following statements:

“(a)     There are substantial transfers of funds to other companies within the Mercury IT Group.

(b)       There have been transfers from the NAB account totalling $865,387.26 which are described in handwritten entries on the cheque butts and bank statements as payments into superannuation funds associated with the Mercury IT Group. I have been unable to locate any documentation amongst [Laptop’s] books and records pertaining to the superannuation funds or otherwise verify the details of those payments. Consequently, I have been unable to establish the beneficiaries of those funds or the nature of [Laptop’s] obligation to make those payments.

(c)       I have identified a number of items which are subject to lease agreements in respect of which [Laptop]  makes the lease payments … payments have been made for registration and insurance on those items and that council rates have been paid from [Laptop’s]  accounts on residential properties;

(d)       Payments totalling $347,692.10 have been made in respect of a proberly at 24 Sturdy Lane, Lovett Bay, notwithstanding that the registered proprietor of that land is the third respondent, Mercury Group Pty Limited. … Payments include monthly mortgage payments, renovations, paintings, maintenance and council rates and fees.

(e)               Up until January 2002 monthly mortgage payments were made from the company’s accounts in respect of the property at 1340/20 Gerrale Street, Cronulla. …I have been informed by Jenny Martin , another employee of [PricewaterhouseCoopers] that she has been informed by the ANZ that the property has been sold.”

29                  The applicant referred to the comment of Mr Dean-Willcocks in the report that he prepared for the creditors of MIT that as a result of its presently unsubstantiated claim in respect of inter-company expenses, Laptopmay well become a creditor rather than a debtor of MIT. The applicant also points out that there appears to be no question of MIT or MIT(SA) continuing to trade or entering into a Deed of Company Arrangement. It may be premature to attach any importance to this issue as the second creditors’ meeting in either of the two administrations has not yet occurred.  Moreover the applicant submits that possible actions (including litigation) to improve the return to creditors identified by Mr Dean-Willcocks and Mr Lock would depend on the preparation of proper accounts.

Respondents’ evidence and submissions in relation to the granting of leave

30                  Submissions made on behalf of MIT(SA) and MIT relied respectively on the evidence of Mr Lock and Mr Dean-Willcocks. In two affidavits sworn on   1 March 2002 and 12 March 2002, Mr Lock gave details about his appointment as administrator and his independence in this role. He also provided information concerning his investigations into the affairs of MIT(SA). He adverted to the possibility that payments to Compaq might be preferential payments and thus recoverable. He stated that, based on his investigations into the affairs of MIT(SA) in his opinion he is able to investigate its affairs properly and can see no benefit to the creditor in the the appointment of another insolvency practitioner to the company.

31                  Mr Dean-Willcocks, in his affidavit of 12 March 2002 , stated that the report as to the affairs of MIT prepared by its director, Mr Merdith shows that Lapland is a debtor to MIT in the amount of $2.6 million. He also made the following statements:

“Having read the affidavit of Mr. Hall of 7 March 2002 it appears to me that there may be a dispute between [MIT] and [Laptop] in relation to the true position on the accounts between those companies. To the extent that the claims made by [Laptop] against [MIT] do not exceed the debt owed by [Laptop] to [MIT], that will result in [Laptop] remaing as a debtor of [MIT].

In the event that the assets of [Laptop] when realised by the receiver are insufficient to pay the debt to the appointor of the receiver, [Compaq], there will be no assets available for recovery by me from [Laptop]. To the extent that the claims by [Laptop] against [MIT] exceed the debt owed to it, then [Laptop] will be a creditor of my administration and its claim will be subject to adjudication by me in accordance with the laws relating to insolvent companies. At the present time [Laptop] has not established that it is a creditor of [MIT]. If [Laptop] is a net creditor of [MIT] then [MIT’s] deficiency will be worse than estimated in the Report as to Affairs referred to earlier in this affidavit.

The process of resolving this dispute between [MIT] and [Laptop] will not beassisted by having another liquidator appointed to [MIT].”

32                  As counsel for MIT(SA) and MIT were prepared to adopt each other’s submissions in relation whether leave should be granted to the applicant to continue this proceeding I shall deal with their submissions without necessarily distinguishing between those made for each company. The bulk of these submissions go to the question of the substantive relief sought by the applicant rather to the question of whether the applicant should be given leave to continue with this proceeding. I shall not deal with them in detail at this stage.

33                  Much was made of the fact that the Mr Hall was appointed receiver and manager of Laptop by Compaq and that Compaq, allegedly the largest creditor of MIT(SA), sought and continues to seek the replacement of Mr Lock as administrator of MIT(SA) (in this proceeding and in the Compaq proceedings) and of Mr Dean-Willocks as administrator of MIT (in this proceeding).  It was submitted that having failed in its attempt to have the administrators removed Compaq brings this proceeding to achieve the same result. Mr Fordyce, solicitor for MIT, referred to Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544 in which Hayne J refused to attach much importance to the largest creditor having its nominee replace the existing liquidator where there was no evidence to suggest that the existing liquidator would not preserve the undertaking of the company or otherwise act to the prejudice of the general body of creditors.

34                  In this case there are claims on both sides of conflict of interest. It is said that Mr Dean-Willcocks is too close to the advisors of Mr Merdith and there might be some necessity to investigate the conduct of Mr Merdith and his dealings with the funds of companies in the Mercury IT Group. It is said that Mr Hall (and presumably Mr Parbery) is too close to Compaq and the question of preferential payments to Compaq may need to be investigated. While these are matters may have some significance in considering whether the substantive orders sought by the applicant should be made, they have little relevance to the question of whether leave should be granted under s 440D and s 459P(3). Such relevance as they have may be only to indicate that there are some serious questions to be addressed in this proceeding.  For clarity I should add that these comments do not suggest that either Mr Lock or Mr Dean-Willcocks have acted other than with complete propriety in their roles as administrators.

35                  The remainder of the submissions made for MIT(SA) and MIT in relation to the grant of leave can be summarised as claiming that nothing will be gained by appointing a provisional liquidator and that therefor there is no point in granting leave and prolonging this proceeding. The comment of Young J in Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203 at 205 that “an application under s 440D will rarely be granted” was referred to. This may well be correct but the comment must also be evaluated in the light of the circumstance then before his Honour. This situation is significantly different. It does not involve allowing one creditor (potential or otherwise) to take the administrator’s time to the detriment to the administration of the company as a whole. This proceeding concerns each company as a whole. If the applicant were to succeed in obtaining a winding up order in respect of either or both of MIT(SA) and MIT, the administration of those companies would cease; s 435C(3)(g) of the Act.

Reasoning in relation to exercise of the Court’s discretion to grant of leave

36                  The appropriate test for the Court to use in determining whether leave should be granted in respect of an action brought against a company which is in the course of winding up or to which a provisional liquidator has been appointed was considered by the Full Federal Court in Vagrand Pty Ltd (in Liq) v Fielding (1993) 11 ACLC 411 (“Vagrand”). The case concerned a claim for relief under s 87 of the Trade Practices Act 1974 (Cth) brought against a company in liquidation. Section 371(2) of the Companies (NSW) Code applied and provided that the applicant required leave of the Court to bring the action. The primary judge had expressed the test for granting of leave as requiring that the Court be satisfied that,

 “a real dispute exists between the parties and that in light of all the circumstances it is more convenient (or otherwise appropriate) to allow the matter to proceed to judgment.”

37                  It was argued before the Full Court that the appropriate test was that the applicant must demonstrate a prima facie case, that is “the applicant must provide evidence of each element of its claim”.  At 416-7 the Full Court rejected this submission and stated that a close reading of the authorities showed that what was required was “that the claim has a solid foundation and gives rise to a serious dispute”. The Court observed that the test is akin to that used in relation to interlocutory relief, namely that there is a “serious question to be tried”. As the reasoning of the Full Court in Vagrand makes clear the test must be applied bearing in mind the purpose behind the making of a winding up order or the appointment of a provisional liquidator. It seems to me that this test is also appropriate to the grant of leave under s 440D(1) provided that in this case also attention is paid to the policy underlying the requirement that leave of the Court be obtained in relation to the commencement or continuance of the proceeding.

38                  In Re Capital General Corporation Ltd (2001) 19 ACLC 848, Warren J in the Supreme Court of Victoria said, at 850-1, in relation to s 400D:

“The section has the purpose of staying proceedings because the placement of the company in administration has the effect of “freezing” the affairs of the company pending assessment by the Administrators and further determination by the creditors pursuant to the statutory scheme. In this respect, s 440D share a similar purpose to that underlying s 467(7) (staying proceedings after the filing of a winding up application) and s 500(2) (staying proceedings after the resolution for a voluntary winding up). The purpose of these provisions is to ensure that the role of the administrator or the liquidator, as the case may be, is not frustrated or interfered with or distracted by other matters such as legal proceedings.”

39                  The picture created by the evidence of Mr Hall and Ms Rowe provides some support for the applicant’s submission that no distribution to the creditors of any one company in the Mercury IT Group can take place until the accounts of the Group companies have been clarified. Whether or not that claim can be vindicated on a full hearing of the matter is not clear. There is certainly some evidence that the position of MIT(SA) is significantly more independent than that of other companies in the Mercury IT Group and further consideration might suggest that it should be exempted from an order affecting others of the corporate respondents.

40                  For reasons expressed in [35] above I do not regard the granting of leave in this case as inconsistent with the policy of either s 440D or s 459P. I am also satisfied, that the evidence suggests that there is a serious issue as to whether the interests of the creditors of the Mercury IT Group and of each company in the group would be better served by having one person sort out the Group accounts, enabling informed decisions to be made about the fate of individual companies.

41                  For these reasons I propose to grant leave to the applicant to proceed against the first and the second respondents

Associate:

Dated:              18 March 2002