Federal Court of Australia

Cussen, in the matter of Monarch Tower Pty Ltd (in liquidation) [2023] FCA 192

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 37AF, and on the ground specified in s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), the affidavit of Neil Robert Cussen affirmed on 21 July 2022 marked “Confidential Affidavit” and the confidential outline of submissions filed on 15 December 2022 be treated as confidential until the conclusion of the liquidation of Monarch Tower Pty Ltd (in liquidation) (ACN 606 801 647) (Company) or until further order.

2.    The time for making an application under s 588FF(1) of the Corporations Act 2001 (Cth) is extended up to and including 22 January 2024 with respect to any voidable transaction involving the Company, and including voidable transactions involving each of any of:

(a)    Jian Lin;

(b)    Li Shao;

(c)    Anthony Thomas Gilbert;

(d)    Shan Shui;

(e)    Zuccubarr Pty Ltd (ACN 006 062 719);

(f)    Timswee Pty Ltd (ACN 006 257 736);

(g)    Payton Capital Ltd (ACN 163 122 478);

(h)    NWC Finance (No 5) Pty Ltd (ACN 150 448 838);

(i)    Rill Trading Resources Inc (British Virgin Islands Company Number 448249);

(j)    Sinoace Holdings Limited (British Virgin Islands Company Number 1474809).

3.    The Plaintiff’s costs be costs in the winding up of the Company.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    Mr Neil Cussen (or the Plaintiff) is the liquidator of Monarch Tower Pty Ltd (in liquidation) (the Company).

2    By the originating process filed on 21 July 2022, he seeks a “shelf order” pursuant to s 588FF(3) of the Corporations Act 2001 (Cth) (the Act), that is, an order that the time for making an application under s 588FF(1) of the Act be extended up to and including 22 January 2024 with respect to any voidable transaction involving the Company and including voidable transactions involving various persons and entities.

3    Mr Cussen relied on two affidavits, affirmed 21 July 2022 and 16 September 2022 respectively. The first of them has been filed on the basis that it is confidential.

4    He also relied on a confidential outline of submissions dated 15 December 2022.

5    I am satisfied that the submissions and the 21 July affidavit should remain confidential until further order because to disclose the matters there deposed to could prejudice Mr Cussen’s further investigations.

6    On 28 August 2019, the Supreme Court of Victoria ordered that the Company be wound up and that Robert Woods and Mr Cussen be appointed as joint and several liquidators of the Company. (Mr Woods resigned as liquidator on 6 August 2021).

7    Under s 91 of the Act, the relation-back day for the winding up of the Company is 22 July 2019.

8    The Company was incorporated on 1 July 2015. As at the commencement of the winding up, Anthony Gilbert, Jian Lin and Li Shao were co-directors of the Company, and there were nine shareholders.

9    Prior to its winding up, the Company operated a property development business. Its only known project involved its acquisition of land situated at 256-266 City Road, Southbank, Victoria in or around May 2016 with the intention of constructing a residential building on it. The Company obtained funding from various parties in connection with the development of the land in the amount of about $34 million.

10    The land was sold for $38 million with settlement occurring on 12 June 2018.

11    The Company ceased trading in January 2018, and did not conduct any other business.

12    Based on his review of the books and records of the Company and the outcome of his investigations into the Company’s affairs, Mr Cussen is of the opinion that the Company exhibited signs of insolvency since as early as 30 June 2016, and the Company’s insolvency is irrefutable from 25 November 2017 onwards, being the date the sale campaign for the land was launched.

13    The current creditor claims against the Company total about $41 million.

14    Section 588FF(3) of the Act provides:

588FF    Courts may make orders about voidable transactions

(1)    Where, on the application of a company’s liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:

(a)    an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;

(b)    an order directing a person to transfer to the company property that the company has transferred under the transaction;

(c)    an order requiring a person to pay to the company an amount that, in the court’s opinion, fairly represents some or all of the benefits that the person has received because of the transaction;

(d)    an order requiring a person to transfer to the company property that, in the court’s opinion, fairly represents the application of either or both of the following:

   (i)    money that the company has paid under the transaction;

(ii)    proceeds of property that the company has transferred under the transaction;

(e)    an order releasing or discharging, wholly or partly, a debt incurred, or a security or guarantee given, by the company under or in connection with the transaction;

(f)    if the transaction is an unfair loan and such a debt, security or guarantee has been assigned—an order directing a person to indemnify the company in respect of some or all of its liability to the assignee;

(g)    an order providing for the extent to which, and the terms on which, a debt that arose under, or was released or discharged to any extent by or under, the transaction may be proved in a winding up of the company;

(h)    an order declaring an agreement constituting, forming part of, or relating to, the transaction, or specified provisions of such an agreement, to have been void at and after the time when the agreement was made, or at and after a specified later time;

(i)    an order varying such an agreement as specified in the order and, if the Court thinks fit, declaring the agreement to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time;

(j)    an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable.

(2)    Nothing in subsection (1) limits the generality of anything else in it.

(3)    An application under subsection (1) may only be made:

(a)    during the period beginning on the relation‑back day and ending:

   (i)    3 years after the relation‑back day; or

(ii)    12 months after the first appointment of a liquidator in relation to the winding up of the company;

whichever is the later; or

(b)    within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.

(4)    If the transaction is a voidable transaction solely because it is an unreasonable director‑related transaction, the court may make orders under subsection (1) only for the purpose of recovering for the benefit of the creditors of the company the difference between:

(a)    the total value of the benefits provided by the company under the transaction; and

(b)    the value (if any) that it may be expected that a reasonable person in the company’s circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c).

15    The court has power make a shelf order extending time without specifying the particular transaction or transactions to which it would apply. See Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489, 496 [3] (French CJ, Hayne, Kiefel, Gageler and Keane JJ).

16    The power to make a shelf order is a discretionary one. In exercising the discretion, the court should consider the following factors:

(a)    the adequacy of the liquidator’s explanation for the delay in commencing proceedings;

(b)    a preliminary view of the merits of the proposed proceedings; and

(c)    a balancing of the case for granting the extension against any actual prejudice to the respondents that is likely to arise from granting the extension.

See Re Cohalan & Mitchell Roofing (in liq) [2020] VSC 222 at [30]-[33] (Sifris J)).

17    I am satisfied that the evidence discloses that the Plaintiff has given adequate reasons for the delay in commencing proceedings. It is sufficient to say that the evidence shows that he has been hampered in his efforts to conduct investigations into the affairs of the Company, for a variety of reasons, including a lack of co-operation from the directors of the Company in providing relevant books and records; a lack of funds in the winding up; the volume of documents which must be reviewed; the books and records obtained, and reviewed, are insufficient to a full understanding of the nature and purpose of the transactions of the Company; and foreshadowed public examinations have not yet taken place.

18    I am also satisfied that the evidence discloses that the merits of the potential actions against named entities, and the directors of the Company, involving unexplained payments and transfers without any apparent basis are sufficiently sound.

19    As to prejudice, I agree with the Plaintiff’s submission that, in circumstances where this application has been served on each putative respondent and none has raised an issue of material prejudice, and where numerous letters of demand have been sent – and there thus being no specific prejudice identified – the notion of “presumptive prejudice” should not tell against the making of the order sought. Cf Re Cohalan & Mitchell Roofing (in liq) at [57].

20    In those circumstances, I am satisfied that that the justice of the case favours the making of orders for the extension of time sought and that it is appropriate to exercise the discretion under s 588FF(3) of the Act in favour of the extension in time sought, and to make the orders in the form sought.

21    For the reasons given at [5] above, I am satisfied that pursuant to s 37AF, and on the ground specified in s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), Mr Cussen’s affidavit affirmed on 21 July 2022 and the confidential outline of submissions filed on 15 December 2022 should be treated as confidential until the conclusion of the liquidation of the Company or until further order.

Associate:

Dated:    9 March 2023