Estjule Pty Ltd, Re [1992] QSC 245

·( ' ( ') TRA1~SCR1PT OF PROCEEDINC:·S . State Reporting B~...au, 4th F1oor, The Law Courts George Street, . BRJSBANE, 0. 4000 Tel. (07) 227.4360 , (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bw-eau.) . . . . .SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION WHITE J No 313 of 1992 IN THE MATTER OF THE CORPORATIONS LAW REViSED COPIES ISSUEO-_- State Ropcrfir.n B"·e-u ·~ ..... , a Date 3 1 'J I 9 ;u . · .. ( · and· IN ~HE MATTER OF ESTJULE PTY LTD ·~ / BRISBANE •. DATE 26/6/92 ORDER 1 -- 1 of 8 -- 260692 ORDER '' HER, HONOUR:.. These are applications before me for ,the appointment of •. a , provisional liquidator to the company Estjule Pty Ltd, and ~m applicat;i.on to validate a contract entered into between the company and the p~rchaser, Westlake Pty Ltd which Mr ~asil, a director of Estjule Pty Ltd, described in his affidavit filed on 22 June 1992 as 10 anagreement whereby the company "agreed to sell all its rights, title and interest in the business together with the goo~will o~ ~he ~usiness and the business's fixtures, fittings, plant and equipment set forth in the schedule to 20 Q, ' ' ~ ' ~ . ' the agreement for a consideration of $1 million" .. There has 0 in fact been an adjustment to that contract price and it is no~. for $,947, 000. 30 The contract was entered into after the commencement of the winding up, hence the need for the validation. The contract was entered into on 13 May 1992, and the winding-up 0 application was presented by the Deputy Commissioner of 40 Taxa~ion, a priority creditor, on 13 April 1992. 01 This· I?atte,r ~as heard very briefly by me at the . end of the day on 23 .. June. and on 24 June when, after a considerable hearing, . an adjournment was granted to . today . to enable more material with respect to the position of the company to be adduced by the company on the validation application. The business of the company is running cruises at. Surfers Paradise. It has a number of vessels in its stable, the 2 50 60 -~-.----- --~- -~------ ...._ ____ ._ ' -- 2 of 8 -- 260692 value of which has been attested to variously by different valuers from extremely high figures to the present valuations ·which are comparatively ··extremely low. The highest valuation was made about 12 months ago when~ it appears, the company was seeking· financial advances. There has been considerable discussion, submission and debate about those figures. The company, in the material put before me today, seeks to distance itself from those high valuations, but the fact remains that they were used by them in the certain knowledge that they could not possibly reflect a proper valuation for the vessels, bearing in mind the information which the company managers and directors say ( they knew about the value of the vessels at the time. ·This ( is a matter of some concern, but Mr Roberts submits it is · irrelevant to the issue before me at the present time. Suffice it to say, however, that the company was advised to insure its vessels on the strength of those valuations which would have been a detriment to the company if they were so valued. \. The secured creditor, AGC, says that it will accept a reduced amount of what is owed to it if the contract is validated, and, I assume by that, if it goes ahead. AGC is owed $716,000 and it will accept $570,000 in settlement of the indebtedness to it. The priority creditor is owed about $200,000. The company says that it has book debts which, in its figures, are said to be. worth $40,000, but there is no 3 10 20 30 40 50 60 -- 3 of 8 -- 260692. particularity as to the recoverability, of those book debts~ although Mr Brlfce Nicholls, the manager,. says .that he thinks in total the amount that might be recovered and available for., the .unsecured qredi tors if the contract is validated, including the book debts, will be some $40,000 to $50,000. The . balance which will· be available on the contract. after the secured and priority creditors are paid out is about $17,000. ·It is fairly. unsatisfactory that the assessment of the yalue of the· book debts by the manager of the company cannot .. be better particularised. 10 20 0 An informal proposal was put to the unsecured creditors of 0 the company, excluding Mr Bruce Nicholls, who says that he has loaned $300,000 and $350,000 respectively. to the company. He is not a compa~y director, but he is a manager of .the- company. He is a guarantor of the company's indebtedness,. and his wife is a director and also a guar~ntor. So, apart from him, the informal proposal was put~ to . the unsecured creditors in May this. year that the unsecured creditors should accept 30 cents in the dollar in complete· discharge -of . the indebtedness of the company to each. of . those creditor~ and a discharge . of any guarantees which we:r-e held by the unsecured creditor. in relation to the indebtedness of the.company. The responses of the unsecured creditors to that proposal indicate .. that .something ~ike 22 pe~ cent of those unsecured creditors were in favour of the proposal representing about $50,000 worth of debts, the total of which is $227,000, and 4 ------------------ 30 oi 40 0 50 60 -- 4 of 8 -- ( \ (\ 260692 about 28 per cent were against that proposal representing in the vicinity of $6b,OOO of the debts.· Fifty per cent, therefore, of the unsecured creditors made no response. The winding up is due 'to proceed next Wednesday. There are factors that have caused me considerable concern which is, of.course,· the reason why I adjourned the matter 'for further· material to be adduced by the company. My view is that it · has been a process of 'dragging information from the applicant company as to its financial affairs, explanations for the various valuations, and an explanation as ·to why no goodwill appears to be a part of the business contract which has been entered into with Westlake Pty Ltd. Mr Sackson, who describes himself as the accountant;for Westlake Pty Ltd, and· its apparent controller, has sworn an affidavit which was filed by Mr Holden, leave ·'this morning. He is a chartered accountant-in practice for·sol1le' 11 years, and he describes the contract price "based on my client's instructions" and having performed a preliminary investigation of the·· financial details that were made available to him of Estjule Pty Ltd, as "generous" taking into account the past financial performance of the business as described in the financial documents that were given to him. He exhibits to his affidavit a report ·which he prepared at the request of Mr Worcester, the solicitor for Estjule Pty ttd, and exhibits to it merely ·the profit and loss accounts ·of ·· the company and no other financial material. 5 10 20 30 40 50 60 -- 5 of 8 -- . __ ..... : '·'· ·-··· ' .... ··-·· : :·~~ ................ , ~ .. . 26069~- It has been submi tt~d by Mr · E.oberts that the creditors who wa,n~ . a provisional liquidator appointed are all business competitors .of Estj ule Pty Ltd and. are interested in seeing its:demise .. Mr Walsh, the local service station proprietor, also supports the appointment. of a provisional liquidator, 10 and he . has a judgment debt against Estj ule P'ty Ltd. The Deputy Commissioner of· Taxation abides the order of the Court, but I thought that I discerned in the submissions made by Mr.Casey from the Australian Government Solicitor's Office that . the Deputy Commissioner was not enthusiastic 20 about the proposed contract. It seems to me.that in view of the fact that the winding-up order on .the material before me is likely to be made next Wednesdp.y, and in viewof the odd situation that a purchaser 30 is apparently seeking to pay more for a business than its accountant .thinks it is worth, it would be in the best interests o:t: the unsecured creditors that a provisional liq:u~dator be appointed to consider the appropriateness of the contract in hand. I say that particularly in light of 40 the fact that cl 26 of the contract permits the purchaser to avoid . the .. cont;ract unless it. is satisfied that . the cre~i tors of the vencjor company_have.been settled to. the creditors satisfaction or nave.entered into arrangements to settle outstanding accounts. Now, while that may not be determinative of the validation, it is certainly a factor which I ought to take into account, since on the material before me there must be at least half 6 50 60 0 0 0 0 -------~---~---· - -- 6 of 8 -- ( 260692 a dozen creditors who are clearly opposed to the contract being validated, and' i:t seems unlikely they would enter into any arrangement unless they are paid out in full. There is no suggestion by the purchaser that there is any intention to pay out those creditors to their satisfaction or what its attitude is to cl 26. So, in all the circumstances; it seems to me that a provisional liquidator ought to be appointed ·to Estjule Pty Ltd. · I have been urged by Mr · Roberts that since the winding'· up will · take place on Wednesday, there is no urgency because there is no risk to the assets of the company between· now and then, even if I do not validate the contract but the fact of the matter is that AGC has indicated in its letter dated 25 June 1992 that it might take possession of the boats, and a provisional liquidator would be able to deal early with AGC and perhaps also with Westlake in terms of purchasing the business of the company. The orily advantage that I can clearly see is that Mr Nicholls and his wife will be released from their guarantees if the proposed agreement is validated as requested. In those circumstances, I dismiss the application' for validation and I appoint Messrs Duus & Summerson to be the provisional liquidators of Estjule Pty Ltd until the winding up of the application. 7 10 20 30 40 50 60 -- 7 of 8 -- 260692 HER HONOUR: The order on the validation application is: (1) that the application to validate be dismissed; (2) that the costs of the Deputy Commissioner of Taxation and Gold Coast Con-X-ion Pty Ltd be costs in the winding up as supporting creditors, those costs to include the costs reserved on 23, 24 June 1992. The order on the application to appoint a provisional liquidator be as per draft initialled by me. 8 10 0 20 0 30 0 40 0 I I 50 60 -------- ------------------ -- 8 of 8 --