Case: Australian Securities Commission v Solomon (1996) 19 ACSR 73
Outcome: followed
principles which apply where a court is considering whether to appoint a provisional liquidator are well established and the following propositions can be extracted from the authorities: (a) the applicant for the appointment must satisfy the Court that there is a reasonable prospect that a winding-up order will be made at the final hearing: Australian Securities Commission v Solomon (1996) 19 ACSR 73 at 80; (b) an applicant must establish that there is good reason for the Court intervening prior to the final hearing of the winding-up application on the basis that the appointment of a provisional liquidator is required in the public interest or to preserve the status quo or to protect the company's assets from dissipation: Allstate Explorations NL v Batepro Australia Pty Ltd [2004] NSWSC 261 at [30] ; (c) the appointment of a provisional liquidator pending the determination of a winding-up application is a drastic intrusion into the affairs of a company and should not be made if other measures are adequate to preserve the status quo: Zempilas v JN Taylor Holdings Limited (No 2) (1990) 55 SASR 103 at 107; Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd [2003] NSWSC 535 ; (2003) 47 ACSR 197 at [217] . Although the power of the Court to appoint a provisional liquidator is unfettered by statute the factors which are often taken into account in determining whether to appoint a provisional liquidator typically include: (a) whether there is a real risk that the assets of the company will be dissipated prior to the time at which a winding-up order is to be made; (b) whether there is a prima facie case for a winding-up order to be made; (c) whether the company's affairs have been conducted in a manner without regard to legal requirements or accepted principles of corporate management: Montgomery Windsor (NSW) Pty Ltd v Ilopa Pty Ltd (1984) 2 ACLC 224 ; Australian Securities Commission v Solomon (supra) at 80; (d) whether in the public interest there is a need for an independent examination of the accounts and financial transactions of the company which are in disarray: Australian Securities Commission v Solomon (supra) at 80. I have had regard to these principles and authorities in preparing these reasons and reaching my conclusions. I consider that the approach to take on an application such as is made by the Commission in the circumstances of this case is usefully summarised by Tamberlin J in Australian Securities Commission v Solomon (supra) at 80: "The relevant principles relating to the appointment of a provisional liquidator which require consideration include the following: (a) The court should only appoint a provisional liquidator where it is satisfied that there is a valid and duly authorised winding up application and that there is a reasonable prospect that a winding up order will be made: see Debelle J in Re J N Taylor Holdings Ltd; Zempilas v J N Taylor Holdings Ltd (1991) 3 ACSR 516 ; 9 ACLC 1 at 12-3. (b) The fact that the assets of the corporation may be at risk is a relevant consideration. (c) The provisional liquidator's primary duty is to preserve the status quo to ensure the least possible harm to all concerned and to enable the court to decide, after a further examination, whether the company should be wound up: Re Carapark Industries Pty Ltd (in liq) (1996) 9 FLR 297; 86 WN (Pt 1) (NSW) 165 at 171. (d) The court should consider the degree of urgency, the need established by the applicant creditor and the balance of convenience: Re Club Mediterranean Pty Ltd (1975) 11 SASR 481 at 484 per Bright J. The power is a broad one and circumstances will vary greatly. Commercial affairs are infinitely complex and various and it is inappropriate to limit the power by restricting its exercise to fixed categories or classes of circumstances or fact. (e) It may be appropriate to appoint a provisional liquidator in the public interest where there is a need for an independent examination of the state of accounts of the corporation by someone other than the directors: Tickle v Crest Insurance Co of Australia Ltd (1984) 2 ACLC 493. (f) Where the affairs of the company have been carried on casually and without due regard to legal requirements so as to leave the court with no confidence that the company's affairs would be properly conducted with due regard for the interests of shareholders, it may be appropriate to appoint a provisional liquidator: see Montgomery Windsor (NSW) Pty Ltd v Illopa Pty Ltd (1984) 2 ACLC 224. "