FEDERAL COURT OF AUSTRALIA

Sinclair v Highgrove (Richmond) Pty Ltd [2011] FCA 1534

THE COURT ORDERS THAT:

1.    Highgrove (Richmond) Pty Ltd ACN 123 956 374 be wound up.

2.    The need for advertising of the winding up application be dispensed with.

3.    David Michael Stimpson and Michael Carrafa be appointed as Liquidators to conduct the said winding up.

4.    The Liquidators have the powers specified by s 477 of the Corporations Act 2001 (Cth) for the purposes of conducting the said liquidation.

5.    It is declared that any act required or authorised to be done by the Liquidators may be done by one or all of the persons so appointed.

6.    The applicants’ and the second, third and fourth respondents’ costs of and incidental to the application including the application for the appointment of a provisional liquidator be costs in the winding up.

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

REASONS FOR JUDGMENT

1    The applicants originally sought the appointment of a provisional liquidator to the first respondent, Highgrove (Richmond) Pty Ltd (Highgrove Richmond). That application was to be heard on 23 November 2011. The need for a hearing that day was resolved by the proffering of undertakings. The end result has been that the applicants and the second, third and fourth respondents have each jointly come to the view that Highgrove Richmond should be wound up on the basis that it is just and equitable so to do. Behind that agreement is a realisation, all too apparent on the evidence read before me, that what one might term the “Sinclair interests” in Highgrove Richmond and the “Bevan interests” in Highgrove Richmond are irreconcilably deadlocked. In effect, because of that deadlock, the company is not in any way reasonably governable.

2    The business of the company was conducted, and is still being conducted, in Melbourne. It involves the retailing of what might loosely be described as “bathroom fixtures and fittings”. The stock concerned is located in Melbourne. The underlying interests in the company are not, however, exclusively to be found in Victoria. The Sinclair interests, which comprise the applicants, are based on the Gold Coast in Queensland whereas the Bevan interests are based in Victoria. Over the course of the Highgrove Richmond’s existence its major source of supplies has been the Sinclair interests.

3    Apart from a quibble in relation to interlocutory costs, the only substantive difference between the parties concerns who should act as the liquidators of Highgrove Richmond.

4    There is no criticism raised in respect of any of the proposed liquidators based on some real or potential conflict of interest. Rather, the controversy relates to how most efficiently and cost effectively a liquidation might be conducted. In turn, that involves making a discretionary value judgment as to whether liquidators wholly based in Melbourne or whether liquidators based in Melbourne and on the Gold Coast respectively might better achieve that end.

5    As might be evident from the brief description of the company and its history, there are good arguments to be raised either way, and they have been raised on behalf of the applicants and the second, third and fourth respondents by their respective counsel.

6    In the very short term, whoever is appointed as the liquidators will have to make a decision as to whether the company’s business is to be carried on and, if so, for how long. That tells in favour of a Melbourne-based liquidator. On the other hand, if there is a need to delve into the books of a major supplier of Highgrove Richmond, that delving will be done on the Gold Coast and any related examination will concern persons based there.

7    There is at least a practice to appoint a liquidator nominated by the applicant for a winding up, although in a deadlock such as this, where either party might have approached the Court first to seek a winding up, I am not convinced that such a practice carries much weight.

8    What does carry more weight with me is the likelihood of work having to be done both in Melbourne and also on the Gold Coast. It is for that reason in particular that I propose to appoint Messrs Stimpson and Carrafa to be the liquidators. In so doing, that appointment in no way carries any criticism at all of the other gentlemen proposed as liquidators.

9    For a winding up to occur today, as opposed to a provisional liquidation, there is a need for advertising to be dispensed with. Advertising has an important role to play under the Corporations Act 2001 (Cth) in terms of notifying not just to the world at large but also to creditors in particular, the existence of a winding up application.

10    Here, though, the circumstances of the company’s business are such that, aside from what one might term “in-house” creditors represented in one way or another today by the Sinclair or Bevan interests, the only substantial creditor is the lessor of Highgrove Richmond’s premises. There is no suggestion on the material read that Highgrove Richmond has traded insolvently. In these circumstances, there does not seem to me to be any particular utility in advertising. I therefore dispense with the need for advertising.

11    The only remaining controversy is one in respect of the costs of the application for provisional liquidation, originally listed on 23 November 2011.

12    In a corporate deadlock situation such as this, it was always likely that the case would proceed through the stages of provisional liquidation and then liquidation. In other words, it was always likely that there would be at least two court appearances. That the first resolved itself by way of undertakings does not detract from that. All that it means is that the costs of an appearance on the 23rd were, very sensibly by the parties, avoided by the giving and acceptance of undertakings. It does not mean that the preparation for the first step was thereby rendered wholly unnecessary. For those reasons, I do not propose to make any order that the applicants pay the second, third and fourth respondents’ costs of and incidental to the hearing fixed for 23 November 2011.

13    Rather, the orders of the Court are as follows.

1.    Highgrove (Richmond) Proprietary Limited ACN 123956374 be wound up.

2.    The need for advertising of the winding up application be dispensed with.

3.    David Stimpson and Michael Carrafa be appointed as liquidators to conduct the said winding up.

4.    The liquidators have the powers specified by s 477 of the Corporations Act 2001 (Cth) for the purposes of conducting the said liquidation

5.    It is declared that any act required or authorised to be done by the liquidators may be done by one or all of the persons so appointed.

6.    The applicant’s costs of and incidental to the application including the application for provisional liquidation, be costs in the winding up.

14    There was no contest as to the need for the making of an order for the winding up of Highgrove Richmond. Had there been, there may well have been an event which would have resonated in terms of costs following a particular event. Here, though, there was no particular event which costs might follow, but rather, each side, for its own reasons, appreciated that a Court-ordered winding up was necessary. The further order there is:

7.    The applicant’s costs and the second, third and fourth respondents’ costs of and incidental to the application, including the application for provisional liquidation, be costs in the winding up.

Associate:

Dated:    18 January 2012