In the matter of Cosmopolitan Constructions Pty Limited (In Liquidation) [2011] NSWSC 1479 (29 November 2011)

Last Updated: 13 December 2011

Supreme Court New South Wales

Case Title:	In the matter of Cosmopolitan Constructions Pty Limited (In Liquidation)
Medium Neutral Citation:	[2011] NSWSC 1479
Hearing Date(s):	29 November 2011
Decision Date:	29 November 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Ball J
Decision:	(1)The first plaintiff validly acted as the Chairman of the meeting of creditors of Cosmopolitan Constructions Pty Limited (In liquidation) (ACN 076 666 610) held on 16 November 2011 . (2)The Plaintiff's costs of this application be paid out of the assets of Cosmopolitan Constructions Pty Limited (ACN 076 666 610).
Catchwords:	CORPORATIONS - company in liquidation - liquidator acted as chairman at meeting of creditors - whether conducted meeting properly - whether inconsistency between Corporations Regulations 2001 r 5.6.17 and Corporations Act 2001 s 497(8) - no inconsistency - liquidator can be chairperson if creditors do not exercise powers under s 497(8) - whether proxies exercised correctly - use of proxies by chairman made no difference to outcome of poll
Legislation Cited:	Corporations Act 2001 (Cth) Corporations Regulations 2001 (Cth)
Cases Cited:
Texts Cited:
Category:	Principal judgment
Parties:	Nicholas Craig Malanos and Christopher Damien Darin as liquidators of Cosmopolitan Constructions Pty Limited (In Liq) (Plaintiffs) Cosmopolitan Constructions Pty Limited (In liquidation) (Defendant)
Representation
- Counsel:	M R Aldridge SC (Plaintiffs)
- Solicitors:	Eakin McCaffery Cox (Plaintiffs)
File number(s):	2011/380974
Publication Restriction:

EX TEMPORE JUDGMENT

1. By an originating process, which I gave the plaintiffs leave to file in court today, the plaintiffs, who are the liquidators of Cosmopolitan Constructions Pty Limited, seek orders to the effect that Mr Malanos, the first plaintiff, validly acted as the chairman of the meeting of creditors of Cosmopolitan held on 16 November 2011, which was the first meeting of the creditors of Cosmopolitan. A number of alternative orders are sought, but it is not necessary for me to refer to those orders in these reasons.

2. Cosmopolitan was a construction company. The plaintiffs were appointed liquidators of it on 4 November 2011. It appears that they were chosen as liquidators because an internal accountant of Cosmopolitan was an acquaintance of Mr Malanos.

3. As I have said, the first meeting of creditors of the company was held on 16 November 2011. During the course of that meeting, a question arose whether the plaintiffs should continue to act as liquidators of the company. Mr Malanos, who chaired the meeting pursuant to Corporations Regulations 2001 (Cth) reg 5.6.17, invited a resolution for the removal of the current liquidators in accordance with s 497(11)(A) of the Corporations Act 2001 (Cth) ( the Act ). The proposed resolution read:

That Nicholas Malanos and Christopher Darren be removed as liquidators of Cosmopolitan Constructions Pty Limited.

The resolution was moved and seconded. It appears that 2 other persons had indicated their willingness to act as liquidators, including Mr Mark Roufeil from PPB Advisory Sydney and also Hills Corporate Services Pty Limited, although there was no attendance by anyone from Hills at the meeting.

4. The resolution was put and was ultimately defeated on a poll. Mr Malanos, as chairman, had special proxies which were both in favour and against the resolution and he also had a number of general proxies. He voted the special proxies in accordance with the directions contained in them and he voted the general proxies to defeat the resolution. According to Mr Malanos, the result would have been the same if he had only voted the special proxies in accordance with the creditors' wishes. It would also have been the same if he had only voted the general proxies against the resolution, or if he had not voted any of the proxies at all that had been given to him.

5. At the time of the meeting, Mr Roufeil raised a question about the conduct of the meeting and, in particular, the fact that Mr Malanos had acted as chairman of the meeting despite s 497(8) of the Act. That section provides:

The creditors may appoint one of their number or the liquidator to preside at the meeting.

6. Mr Aldridge SC, who appeared for the plaintiffs, pointed out that there is some tension between reg 5.6.17 and s 497(8) because reg 5.6.17 says in effect that, if a meeting is convened by a liquidator, the liquidator must chair the meeting whereas s 497(8) leaves the question to the creditors. However, I accept Mr Aldridge's submission that reading the provisions together reg 5.6.17 should be read as providing that the liquidator will act as chairperson of the meeting unless the creditors exercise their rights under s 497(8). Section 497(8) should be read as giving power to the creditors if they want to exercise it to appoint one of their number or the liquidator to preside over the meeting. However, the creditors are not required to exercise that power in order for the meeting to be valid.

7. Following the meeting, Mr Roufeil raised a number of questions in relation to the way it had been conducted and sought information concerning the exercise of the proxies by the chairman. That information was provided and, as a consequence of the request, Mr Malanos did some further analysis of the proxies which he described in some detail in the affidavit which was sworn by him and read in support of the current application. I do not think it is necessary for me to go through that analysis. It is sufficient to say that I am satisfied on the basis of what is set out in that affidavit that the additional analysis would not have made any difference to the results of the poll that was conducted.

8. The issues raised by Mr Roufeil were set out in a letter dated 21 November 2011 which he sent to the liquidators. They fall into 2 categories. First, Mr Roufeil says that Mr Malanos acted as chairperson of the meeting in circumstances where he had not been appointed by the creditors. Second, he suggests that Mr Malanos' use of the proxies was unlawful.

9. The first issue raised by Mr Roufeil deals with the inter-relationship between reg 5.6.17 and s 497(8). I have already dealt with that issue.

10. So far as the second issue is concerned, it seems to me it was appropriate for Mr Malanos to cast the special proxies in the way that he did - that is, in accordance with the creditors' wishes. There is no reason why he could not exercise the general proxies to him in the way that he thought fit, but in any event, that made no difference to the outcome of the resolution. Consequently, I do not think that there is any substance in this second point.

11. The application before me is an ex parte one. However, the plaintiffs gave notice that they intended to make this application to committee members, creditors for whom they had valid email addresses, the Commonwealth Bank, a secured creditor, Crane Holman Webb, who were the solicitors acting for the creditor who moved the motion in relation to the removal of the plaintiffs as liquidators, and to Mr Roufeil. Notice of the application was also given to ASIC. Although the matter was called, there was no appearance by any party.

12. Section 511(1) of the Act relevantly provides that the liquidator or any contributing creditor may apply to the court to determine any question arising in the winding up of a company. In circumstances where some doubt has been raised concerning the first creditors' meeting, I think it was appropriate for the liquidators to have made the current application and I also think it is appropriate, for the reasons that I have given, to make an order that Mr Malanos validly acted as chairman of that meeting. It also seems to me appropriate to make an order that the plaintiffs' costs of this application be paid out of the assets of the company.

13. The orders of the court are:

(1) The first plaintiff validly acted as the Chairman of the meeting of creditors of Cosmopolitan Constructions Pty Limited (In liquidation) (ACN 076 666 610) held on 16 November 2011.

(2) The Plaintiff's costs of this application be paid out of the assets of Cosmopolitan Constructions Pty Limited (ACN 076 666 610).

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