FEDERAL COURT OF AUSTRALIA

Boyd Industries Pty Ltd v 1297 KRL McMillans Pty Ltd [2024] FCA 229

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 472(2) of the Corporations Act 2001 (Cth) (Act) Mathew Terence Gollant of CJG Advisory is appointed provisional liquidator of 1297 KRL McMillans Pty Ltd ACN 659 997 725 (Company) until the making of a winding up order or otherwise until further order.

2.    The provisional liquidator shall have, in respect of the Company, all the powers that a liquidator of a company would have pursuant to ss 472(3) and (4) and s 477 of the Act and, without limiting the foregoing, the following powers:

(a)    to enter into possession and take control of all assets of the Company including all assets of the Company used in or relating to its operations, together with all books, records, computers, computer disks, and any other papers or records relating thereto;

(b)    to deal with any monies held by or on behalf of the Company or its officers, employees or agents or any of them, being monies received in relation to or employed in the Company's operations;

(c)    to operate and inspect any account at any bank or other financial institution being an account operated by the Company or its officers, employees or agents or any of them and to withdraw any such monies and to pay any such monies into an account or accounts opened or maintained by or for the provisional liquidator;

(d)    to appoint a solicitor, accountant or other professionally qualified person either within or outside Australia to assist the provisional liquidator;

(e)    to delegate to his partners, directors, employees and agents whether within or outside Australia any business or matter that the provisional liquidator is unable to do himself or that can be done more conveniently by those others;

(f)    to receive any monies due to the Company relating to its operations;

(g)    to compromise any calls, liabilities to calls, liabilities capable of resulting in debts and any claims (present or future, certain or contingent, ascertained or sounding only in damages) subsisting or supposed to subsist between the Company and a contributory or other debtor or person apprehending liability to the Company, and all questions in any way relating to or affecting the property of the Company, on such terms as are agreed, and take any security for the discharge of, and give complete discharge in respect of, any such call, debt, liability or claim;

(h)    for the purposes of maintaining and securing the assets of the Company:

(i)    to pay any expense, including for the purposes of insurance;

(ii)    to execute any document;

(iii)    to bring or defend any proceeding;

(iv)    to carry on business;

(v)    to obtain credit; and

(vi)    do any other act or thing,

in the name of or on behalf of the Company, its officers, employees or agents or any of them;

(i)    to make any application to any court or regulatory agency for the purposes of exercising the powers in (a) to (h) above;

(j)    to apply for further orders, including the power to realise the assets and pay the liabilities of the Company and to seek directions as to the disposition of any remaining proceeds, and to apply for the power that a liquidator would have under s 568 of the Act to disclaim onerous property or unprofitable contracts and for leave to exercise the power; and

(k)    to receive remuneration on a time basis within the scale of charges approved by the Court, such remuneration to be paid from the proceeds of the winding up.

3.    The costs of Thera Agri Capital No.3 Pty Ltd ACN 654 270 578, Thera Agri Finance Pty Ltd ACN 679 265 789 and Boyd Industries Pty Ltd ACN 155 929 776 of the Interlocutory Process filed 29 February 2024 are 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

INTRODUCTION

1    By interlocutory process filed 29 February 2024, the applicants, Thera Agri Capital No.3 Pty Ltd (TAC No 3) and Thera Agri Finance Pty Ltd (TAF) (collectively, the Thera Parties) applied under section 472(2) of the Corporations Act 2001 (Cth) (the Act) for the appointment of a provisional liquidator to 1297 KRL McMillans Pty Ltd (the Company) until the making of a winding up order or otherwise until further order.

2    The application was brought in this proceeding, in which another creditor of the Company, Boyd Industries Pty Ltd (the Plaintiff), seeks an order that it be wound up.

3    The application was supported by affidavits of Mark Simon Allen sworn 28 February and 6 March 2024; affidavits of Stephen Christopher Kyrou sworn 28 February and 4 March 2024 and an affidavit of service by Dennis John Domaille sworn 4 March 2024. Mr Allen is a director of TAC No 3 and TAF. Mr Kyrou is a solicitor employed by Piper Alderman, solicitors for the Thera Parties.

4    The Thera Parties also relied on two affidavits filed by the Plaintiff, being an affidavit of Nicholas Ashley Boyd sworn 12 February 2024; and an affidavit of Monica Roberts sworn 9 February 2024.

5    A written consent of a registered liquidator, Mathew Terence Gollant, was provided. Mr Gollant has also provided a consent to be liquidator of the Company which was filed with the application for winding up.

6    I heard the application as a duty matter on 5 and 7 March 2024. Mr Michael Lhuede, solicitor, appeared for the Thera Parties. Mr Joshua Forrest of counsel appeared for the Plaintiff, and supported the making of the orders sought. Mr Craig Stevenson, solicitor, appeared for the Company. He opposed the making of the orders. Ms D Peyton also appeared on the second day, representing Reid’s Stockfeed Pty Ltd, another creditor. She did not oppose the appointment of a provisional liquidator.

7    At the conclusion of the hearing I made the orders set out above. These are my reasons.

THE FACTS

8    The Thera Parties are part of the Thera Capital Management Group of companies of which Thera Capital Management Pty Ltd is the general management entity (Thera). Thera is a non-bank lender specialising in providing finance solutions to the Australian farming sector, particularly in the financing of livestock, crops and farmland.

9    TAF and TAC No 3 are creditors of the Company and each has filed an appearance as supporting creditors in the winding up proceeding.

10    A search of the records maintained by the Australian Securities and Investments Commission (ASIC) in relation to the Company shows that:

(a)    its registered office is 17 Joan Court, Reservoir, in Victoria;

(b)    the sole director of the Company is Shane Zampa of that same address;

(c)    Mr Zampa was appointed on 1 February 2024;

(d)    the former directors (and former sole shareholders) of the Company were: Ewan Carkeek for the periods 7 June 2022 to 17 October 2023 and 8 December 2023 to 1 February 2024; and James McKenzie for the period 17 October 2023 to 26 January 2024; and

(e)    Mr Zampa is now the sole shareholder.

11    On 30 June 2022 the Company entered into a Contract of Sale of Land pursuant to which the Company agreed to purchase from the vendor the land situated at 1297 Kerang-Leitchville Road, McMillans, in Victoria (the Property) for the sum of $4.85 million.

12    The Company became the sole registered proprietor of the Property on 6 December 2022.

13    Thereafter the Company acquired a dairy herd and conducted a dairy operation on the Property. The Company has since ceased operating the dairy and it does not carry on any other business.

14    Pursuant to an Agricultural Commodities Finance Facility dated 10 November 2022 between TAF as financier, the Company as borrower and Mr Carkeek as guarantor, TAF provided the Company with an uncommitted revolving cash advance facility with a facility limit of $2.5 million (Facility Agreement).

15    The purpose of the loan was for the payment of the amount owing to suppliers in respect of Commodities, being livestock, stock-feed, freight and other goods and services from time to time approved by TAF.

16    Pursuant to a General Security Deed dated 16 November 2022, the Company and Mr Carkeek granted a security interest to TAF in all their present and after-acquired property to secure payment of all present and future debts and monetary liabilities of an Obligor to TAF under the Facility Agreement.

17    TAF subsequently registered security interests on the Personal Property and Securities Register (PPSR) over the Company, including an all present and after-acquired property (All-PAAP) with exception security interest and a security interest over all present and after acquired livestock of the Company.

18    Pursuant to a General Security Deed dated 18 December 2023, Mr McKenzie granted a security interest to TAF in all his present and after-acquired property to secure payment of all present and future debts and monetary liabilities of an Obligor to TAF under the Facility Agreement.

19    TAF subsequently registered an All-PAAP with exception security interest on the PPSR over Mr McKenzie, and a security interest in all marketable securities held by Mr McKenzie, including in the Company.

20    Pursuant to a deed dated 22 November 2022 between TAC No 3 and the Company, TAC No 3 agreed to provide a Murabaha facility to the Company in an aggregate amount equal to the facility amount of $3.822 million under the terms of a Murabaha Agreement. The sum of $3.7 million was made available to be applied towards, among other things, payment of the purchase price of the Property.

21    Pursuant to a General Security Deed dated 22 November 2022, the Company and Mr Carkeek granted a security interest to TAC No 3 in all of their present and after-acquired property to secure payment of all present and future moneys which they are or in the future liable to pay TAC No 3 under, inter alia, the Murabaha Agreement.

22    TAC No 3 subsequently registered All-PAAP with exception security interests on the PPSR in respect of the Company and Mr Carkeek.

23    On 13 December 2022, TAC No 3 registered a mortgage over the titles to the Property.

24    Pursuant to a Deed of Guarantee and Indemnity dated 22 November 2022 between Mr Carkeek and TAC No 3, Mr Carkeek agreed to guarantee the due and punctual payment by the Company of all moneys from time to time due and payable by the Company to TAC No 3, and the due and punctual performance of all obligations owed or which may become owing by the Company to TAC No 3.

25    Upon becoming aware that Mr Carkeek had ceased being a director and shareholder of the Company in October 2023, and that he had been replaced in both roles by a person identified as James McKenzie, TAF required that the Facility Agreement be varied by adding Mr McKenzie as a guarantor and the provider of security pursuant to a deed entitled “Variation of Agricultural Commodities Finance Facility” dated 8 December 2023.

26    On 18 January 2024, TAF served the Company with a Notice of Default and Payment Demand dated 18 January 2024. The notice relevantly stated:

(a)    events of default had occurred under the Facility Agreement and the General Security Deed, including:

(i)    failure to pay on the due date money due for payment;

(ii)    failure to direct all Funded Commodity sale proceeds directly to TAF;

(iii)    failure to comply with undertakings.

(b)    TAF terminated the Facility and all obligations of TAF pursuant to the Facility Agreement with immediate effect, and declared all of the Secured Money to be immediately due and payable;

(c)    TAF may exercise its rights under the terms of the General Security Deed without further notice;

(d)    The events of default may create a cross default(s) on other facilities;

(e)    TAF demanded immediate payment of the amount of $2,478,698.29.

27    On 19 January 2024, TAC No 3 served the Company with a Notice of Default and Payment Demand dated 19 January 2024. The notice relevantly stated:

(a)    events of default had occurred under the Murabaha Agreement, including:

(i)    failure to pay the Deferred Sale Price of $4,209,618.00 by the Deferred Payment Date of 5 December 2023;

(ii)    the Company had created a cross default by reason of entitling TAC No 3 to declare Financial Indebtedness to be due and payable, and

(iii)    a material adverse change in the financial circumstances of the Company’s business.

(b)    TAC No 3 cancelled the Facility Amount with immediate effect, and declared all of the Secured Money to be immediately due and payable;

(c)    The events of default may create a cross default(s) on other facilities;

(d)    TAC No 3 demanded immediate payment of the amount of $4,301,552.94.

28    On 19 January 2024:

(a)    TAC No 3 issued a demand for payment to the Company and Mr Carkeek (as guarantor) in respect of the Murabaha Agreement.

(b)    TAF issued a demand for payment to the Company, Mr Carkeek and Mr McKenzie (as guarantors) in respect of the Facility Agreement.

29    On 19 January 2024, the Thera Parties exercised rights under the facilities and entered onto the Property and removed all livestock thereon. Almost 400 head of cattle were removed and have been sold for a total amount of about $400,000.

30    The Company has not made payment of any demanded amounts.

31    As at 27 February 2024, the amount owing under the Facility Agreement was $2,063,645.10 and the amount owing under the Murabaha Agreement was $4,338,294.19.

32    By notices dated 24 January 2024, the Thera Parties issued notices under the Farm Debt Mediation Act 2011 (Vic) (Farm Debt Mediation Act) to the Company. The mediation is unlikely to take place prior to 15 April 2024.

33    Pursuant to a statutory demand dated 10 January 2024, the Plaintiff demanded payment from the Company in the amount of $114,555.15 in respect of unpaid invoices for hay for the period March 2023 to June 2023.

34    On 12 February 2024, the Plaintiff filed a winding up application in this proceeding. It is returnable on 20 March 2024.

STATUTORY FRAMEWORK

35    Section 472(2) of the Act provides that “[t]he Court may appoint a registered liquidator provisionally at any time after the filing of a winding up application and before the making of a winding up order or, if there is an appeal against a winding up order, before a decision in the appeal is made.”

36    Section 472(2) of the Act does not stipulate criteria governing the appointment of a provisional liquidator. As a discretionary power, it must be exercised judicially by reference to considerations relevant to its exercise.

37    The Court’s wide power to appoint a provisional liquidator should, generally speaking, only be exercised where:

(a)    the Court is satisfied that there is a reasonable prospect that a winding up order will be made following the hearing of the winding up application; and

(b)    some good reason is shown for placing the company’s affairs under external control prior to the hearing of the winding up application, such as public interest considerations, a need to preserve the status quo or the protection of the company’s assets and affairs.

38    The appointment of a provisional liquidator has been called “a drastic intrusion” into the affairs of a company and should not be ordered if less intrusive measures are available that would be adequate to preserve the status quo.

39    Factors relevant to the exercise of the Court’s discretion to appoint a provisional liquidator include:

(a)    whether the affairs of the company have been conducted casually without due regard being given to the applicable legal requirements so as to cause me to have no or little confidence that the affairs of the company are being carried out properly;

(b)    whether the assets of the company will be dissipated in the interim period between the filing of the application to wind up and the winding up order being made;

(c)    whether in the public interest there is a need for an examination of the state of the accounts of the company; and

(d)    whether, if the appointment was not made, there was a strong possibility that there would be further acts, omissions or events which would be detrimental to creditors or shareholders.

See Australian Securities and Investments Commission v AGM Markets Pty Ltd [2018] FCA 1119; (2018) 129 ACSR 335 at [83].

40    Another relevant factor is whether there is a substantial deficiency of assets against liabilities which has not been contested.

41    As Davies J put it in Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd [2017] FCA 437; (2017) 12 BFRA 668 at [4]:

… whilst the power to appoint a provisional liquidator is not circumscribed, and there is a wide discretion, an applicant for the appointment of a provisional liquidator generally needs to satisfy the Court that there is a reasonable prospect, or it is reasonably likely, that a winding up order will be made on the application … and the applicant can point to some good reason for intervention prior to the final hearing and show that the appointment is needed in the public interest, or to preserve the status quo in relation to the affairs of the company, or to protect the company’s assets … (citations omitted).

42    Where the company against whom the order is sought appears, then as Young J said in Riviana (Aust) Pty Ltd v Laospac Trading Pty Ltd (1986) 10 ACLR 865 at 866:

… the court takes into account the fact that the company is present, so that the company has an opportunity of putting before the court any relevant factors as to why a provisional liquidator should not be appointed. If the plaintiff’s affidavits raise matters to which a court would expect there to be some answer and there is no answer provided then that in itself raises a matter of suspicion that it may well be in the public interest to put in a provisional liquidator.

CONSIDERATION

43    The statutory presumption of insolvency pursuant to section 459C(2)(a) of the Act applies in this proceeding as the Company failed to comply with the statutory demand issued by the Plaintiff.

44    As it was put in the Thera Parties’ written submissions, the following is a list of the other indicators of the Company’s insolvency which were made good by the evidence:

(1)    the cumulative amounts owing under both the Facility Agreement and the Murabaha Agreement, which are due and payable, are $6,401,939.29 (plus interest and eligible costs);

(2)    the Company likely has minimal cash at bank noting the cash at bank in the ANZ Account as at 17 November 2023 was $16,531 and the Company has not traded since at the latest 19 January 2024;

(3)    the Company’s sole asset of substance is the Property, and the cumulative amounts owing under both the Facility Agreement and the Murabaha Agreement substantially exceed value of the Property;

(4)    creditors have issued demands for non-payment of invoices from at least March 2023; and

(5)    invoices even for nominal amounts have not been paid.

45    For those reasons, there is a reasonable prospect that a winding up order will be made following the hearing of the winding up application.

46    The evidence before me, which was not contradicted or otherwise explained, also demonstrated that there is good and pressing reason to place the Company’s affairs under external control prior to the hearing of the winding up application, including as follows.

47    There have been recent unexplained changes in directorship and shareholdings of the Company.

48    In October 2023, Mr Carkeek was removed as sole director and shareholder and Mr McKenzie was appointed as sole director and shareholder.

49    Mr Carkeek received nothing for the transfer of shares in the Company, had never signed any other documents or agreed to his resignation as a director and did not control making those changes to the ASIC register.

50    Mr Allen became aware of the removal of Mr Carkeek as the sole director and shareholder of the Company, and the appointment of Mr McKenzie as the sole director and shareholder, through an automated alert.

51    Subsequently, he met with Mr McKenzie at Thera’s office on 30 November 2023. Mr McKenzie was accompanied by Mr Stephenson (who appeared for the Company at the hearing of this application). At the meeting, Mr Allen deposed, Mr McKenzie told Mr Allen that he had taken over the Company because Mr Carkeek “had become overwhelmed” and that he had not paid anything for the share transfer.

52    Mr Allen told Mr McKenzie that Thera would be undertaking a background check on him, at which point Mr McKenzie said that his real name was Cameron James McKenzie; he was a former solicitor and that he had been convicted and jailed for extortion.

53    On 1 February 2024, Mr Carkeek was removed as sole director and shareholder and a person identified as Shane Zampa of 17 Joan Court, Reservoir was appointed as sole director and shareholder.

54    Mr Allen exhibited to his 23 February affidavit a “Court and Tribunal Action report” of Shane Zampaglione dated 16 February 2024, which records twelve criminal matters in which Mr Zampaglione was a defendant.

55    Mr Allen deposed that he understands that Mr Zampa and Mr Zampaglione are the same person. Mr Stevenson did not contend otherwise.

56    Mr Allen deposed that Thera was not aware at the time of entering into the Facility Agreement and the Murabaha Agreement that Mr Carkeek was not the beneficial owner and controller of the Company.

57    Further, Mr Allen deposed it is not apparent that anyone is currently managing the Company.

58    Mr Allen also deposed to various facts dealing with inexplicable use of the Company’s funds, as well as evidence about damage being done to and theft of the Company’s property and plant and equipment in the absence of appropriate management, the details of which need not be set out.

59    For all those reasons, this is a case where the appointment of a provisional liquidator was necessary and that there was “no other solution” available which would adequately achieve the requisite protective purpose.

60    The Company sought to rely on the affidavit of Sonya Reeves sworn on 6 March 2024, the affidavit of Ewan Carkeek sworn on 6 March 2024 and the affidavit of James McKenzie sworn on 4 March 2024. It is sufficient to say that the evidence was of no relevance to the issues at hand, and in particular did not address the issue of insolvency.

61    I should mention one other point. Mr Stevenson submitted that I should adjourn the application until after the mediation required by the Farm Debt Mediation Act (not before 15 April 2024).

62    The Farm Debt Mediation Act provides that until such time as that mediation has been undertaken, and subject to the outcome of it, the Thera Parties cannot take possession of the Property or otherwise enforce a farm mortgage. See s 7A(1) and the definition of “enforcement action” in s 3. The prohibition under the Act on a creditor taking enforcement action under a farm mortgage does not include a prohibition on the commencement or prosecution of winding up proceedings. That is a well-established proposition under the Victorian Act and the cognate provisions in New South Wales. See National Australia Bank Ltd v Charlton (No 4) [2019] NSWSC 1477 at [411] (Walton J) and the cases there cited. See also Commonwealth Bank of Australia v Trellis Holdings (1986) 19 ACSR 319 (McLelland CJ in Eq).

63    It follows that the Farm Debt Mediation Act did not prevent the appointment of a provisional liquidator in this proceeding, or act as any obstacle to such an application being heard and determined.

64    For those reasons, I made the orders sought, set out above.

Associate:

Dated:    13 March 2024