FEDERAL COURT OF AUSTRALIA

Redemption Capital Pty Ltd v Cobrum Capital Trading Pty Ltd; In the Matter of Cobrum Capital Trading Pty Ltd [2008] FCA 1747

Corporations Act 2001 (Cth), ss 95A, 459P(2), 459P(3), 459P(4), 459P(5), 472(2)  

IN THE MATTER OF COBRUM CAPITAL TRADING PTY LTD ACN 122 517 953

REDEMPTION CAPITAL PTY LTD ACN 125 412 393 and LUTHER PHILIP POIER v COBRUM CAPITAL TRADING PTY LTD ACN 122 517 953

NSD 1768 of 2008

FOSTER J

18 NOVEMBER 2008

SYDNEY

THE COURT:

1.                   NOTES that there is no appearance by or on behalf of the defendant.

2.                   GRANTS leave to the plaintiffs to file in Court the Affidavit of Service of Michael Leonard Stevens sworn on 17 November 2008; the Affidavit of Service of Beau Zenari sworn 14 November 2008; the Consent of Provisional Liquidator dated 11 November 2008; and the document styled “Outline of Submissions – Principles Applicable to Appointment of Provisional Liquidator”.

3.                  NOTES the undertaking as to damages given by the plaintiffs, who are the applicants on this Application, by their Counsel, and upon the basis of this undertaking being given:

THE COURT ORDERS THAT:

4.                  To the extent required, the plaintiffs have leave pursuant to s 459P(2) of the Corporations Act 2001 (Cth) (“the Act”) to make and proceed with their application for an order that the defendant be wound up and also their application for the appointment of a provisional liquidator to the defendant.

5.                  Pursuant to s 472(2) of the Act, Blair Pleash of Hall Chadwick, Level 29, St Martins Tower, 31 Market Street, Sydney, is appointed as liquidator of the defendant provisionally.

6.                  The Originating Process is stood over for hearing before the Corporations Registrar at 9.15 am on 12 December 2008.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                     In their Originating Process, the plaintiffs seek orders for the winding up of the defendant, Cobrum Capital Trading Pty Ltd, on the just and equitable ground and upon the basis that it is insolvent.  The Originating Process in which those orders are sought was filed on 12 November 2008.  At the same time that that process was filed, the plaintiffs filed the Interlocutory Process which has been returned before me today.  In the Interlocutory Process, the applicants (plaintiffs in the proceedings) seek the appointment of a provisional liquidator to the defendant.  The Originating Process, Interlocutory Process and affidavit in support have all been served upon the defendant.  Notwithstanding that lawyers have been acting for the protagonists of the applicants for some time, there has been no appearance before me today either by or on behalf of the defendant or by or on behalf of the other parties who are interested in the present application.  Accordingly, the application made to me today has proceeded ex parte. 

2                     The first applicant is a shareholder in the defendant.  It holds 25% of the issued capital of the defendant.  The balance of the issued capital of the defendant is held by a company called Temujin Capital Pty Ltd which, on the evidence before me, is controlled by Thomas Harold Paterson.  It appears also from the evidence before me that the first applicant is a creditor of the defendant in its capacity as the trustee of the Redemption Trust.  The first applicant has lent moneys to the defendant which have been on-lent to a related company in order to keep the latter company afloat.  Thus, the first applicant is both a creditor and a contributory of the defendant. 

3                     The second applicant is a director of the defendant.  The other director is Thomas Harold Paterson.  The Chief Executive Officer of the defendant is Ian Thomas Paterson who is the son of Thomas Harold Paterson.  The second applicant has apparently given a guarantee to BankWest in support of a Non-Disclosed Invoice Discounting Facility provided by BankWest to the defendant.  The limit of that facility is currently set at $5 million. 

4                     The second applicant is thus a contingent creditor.  To the extent required and for reasons which I will briefly explain, I propose to grant leave to the second applicant pursuant to s 459P(2) of the Corporations Act 2001 (Cth) (“the Act”) to join in the present application as second applicant and to apply to the Court as second plaintiff in the proceedings for an order that the defendant be wound up.  In doing so, I am conscious of the terms and requirements of sub-sections (2), (3), (4) and (5) of s 459P of the Act. 

5                     The present application is supported by an affidavit sworn by Luther Philip Poier who is the second applicant and second plaintiff in the proceedings.  That affidavit contains evidence of a number of matters going to the history of the relationships among the parties and the individuals who are involved in the management of them.  I do not need to deal with that material in detail for present purposes.

6                     It appears from that affidavit that the second applicant has been endeavouring to ascertain the precise financial position of the defendant for some months now.  He has been particularly concerned to satisfy himself that the defendant has complied with its taxation obligations.  He has been relatively unsuccessful in obtaining the information which he has sought, although some information has been provided. 

7                     The defendant ceased trading by no later than about April 2008 and has not resumed trading since ceasing to trade at that time. 

8                     The evidence discloses that the Chief Executive Officer of the defendant, Ian Paterson, has procured in favour of a company controlled by his wife, SCG Meats Pty Ltd, a Power of Attorney which, on its face, entitles SCG Meats Pty Ltd to deal with the assets and affairs of the defendant in a fashion uncontrolled by the directors of the defendant.  There is some suggestion in the evidence that that Power of Attorney has already been utilised.  However, whether it has or has not been utilised, the simple fact is that it was granted without the approval of the Board of Directors of the defendant and obviously with a view to wresting control of the affairs of the defendant from its Board of Directors in favour of interests associated with the Patersons. 

9                     The evidence also discloses that, by letter dated 27 October 2008, BankWest called up the entire balance of the facility to which I referred earlier.  The balance said to be due as at that date was $835,985.80.  That demand has not been met. 

10                  In those circumstances, as the evidence presently stands, the company appears to be insolvent within the meaning of s 95A of the Act.  

11                  In addition to the granting of the Power of Attorney in favour of SCG Meats Pty Ltd and the BankWest demand for repayment of its facility, the evidence also demonstrates that funds due to the defendant from various property transactions may well have been diverted from the defendant in circumstances which are, at the very least, suspicious. 

12                  The second applicant has also had difficulty gaining access to the books and records of the defendant. 

13                  All of these matters came to a head in early November 2008 when the solicitors for the applicants suggested to the lawyers acting for the Paterson interests that meetings of directors should be convened for the purpose of appointing a voluntary administrator to the defendant and to a company in which the defendant holds all of the issued capital, namely, Paterson Building Solutions Pty Ltd.  The evidence discloses that this latter company has been actively engaged in business activities but that it may well also be in financial difficulty.  It seemed to be common ground amongst the second applicant and the Patersons that both the defendant and Paterson Building Solutions Pty Ltd were insolvent as at early November 2008 with no prospect of any improvement. 

14                  The lawyers who have been representing the Paterson interests agreed to a meeting being convened for the purposes outlined. 

15                  That meeting took place by way of a telephone hook up on 10 November 2008.  When I say “telephone hook up”, I mean to convey that there were persons in Sydney, namely, the second applicant and two lawyers representing the applicants, who were connected by telephone conference call with various people located in the lawyers’ or the Paterson interests’ office in Melbourne.  Also in attendance in Melbourne was Mr Dye, who is an insolvency practitioner. 

16                  The Minutes of the meeting have been tendered in evidence before me.  It is reasonably clear that the meeting did not ultimately deal with the question of what was to happen with the defendant because the telephone hook up was terminated prior to the time when that matter was to have been discussed.  However, the Minutes do disclose that there was discussion which, in substance, addressed the affairs of both the defendant and Paterson Building Solutions Pty Ltd, in terms of the solvency of those companies and in terms of what should be done with them.

17                  According to the Minutes which have been tendered before me, the lawyer representing the Paterson interests said that Paterson Building Solutions Pty Ltd had no money to keep going.  He went on to say, during the course of the discussion, that voluntary administration was probably not a sensible approach because Paterson Building Solutions Pty Ltd would be unable to trade its way out of its current insolvent situation.  Mr Dye apparently contributed a comment to the group that what was now proposed was that Paterson Building Solutions Pty Ltd be placed into liquidation. 

18                  There was then some discussion as to the best way of dealing with the apparently agreed fact that both companies were insolvent.  An impasse was reached and the telephone hook up was terminated. 

19                  I should also mention that, at the same time as it made formal demand for the repayment of the amount of its facility, BankWest placed an independent auditor into the defendant, with a view to ascertaining its true financial position. 

20                  On the evidence before me it seems to me that, in all probability, the defendant is insolvent.  It also seems to me that there are transactions in respect of the defendant which have possibly already been carried out or which are in contemplation which are, at the very least, suspicious.

21                  It is also reasonably clear that an impasse has been reached between the two shareholder groups in terms of how the defendant is to be dealt with in the future. 

22                  There is no suggestion that there are employees of the defendant, other than Ian Paterson and, perhaps, his wife, who will be affected by the appointment of a provisional liquidator to the defendant.  The defendant, as I have already noted, has ceased trading.  The company also seems to be unable to meet the demand from BankWest. 

23                  All of these matters lead me to conclude that it is appropriate to grant the relief sought.  I am conscious of the fact that in doing so I will be permitting the provisional liquidator who is appointed to the defendant to have a very substantial say in the affairs of the other company, Paterson Building Solutions Pty Ltd.  However, on the evidence before me, it does seem that the affairs of the two companies have been intermingled for some time and that the appropriate course is now to place an independent person into the controlling entity with a view to ensuring that the interests of all relevant parties, including the creditors, are protected. 

24                  I make the orders set out in the Short Minutes as amended and initialled by me and placed in the Court file.  I will also place the applicants’ written Outline of Submissions in the Court file.

Associate:

Dated:         26 November 2008