Re Stadbuck Pty Limited [1993] FCA 239 (18 May 1993)

FEDERAL COURT OF AUSTRALIA

Re: STADBUCK PTY. LIMITED
No. NG3044 of 1993
FED No. 319
Number of pages - 12
Corporations

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
Sheppard J(1)

CATCHWORDS

Corporations - winding up of company on its own application - appointment of liquidator - liquidator appointed provisionally after investigation by him of company's affairs - provisional liquidator's appointment as liquidator opposed by small majority of creditors - whether provisional liquidator should be appointed liquidator - consideration of particular facts and circumstances of case.

Corporations Law, s.472

HEARING

SYDNEY, 21 April 1993
18:5:1993

Counsel for the Applicant: J.K. Chippindall

Solicitors for the Applicant: Schrader and Associates

Counsel for the Opposing Creditors: R.W. Tregenza

Solicitors for the Opposing Creditors: K.M. Harkness and Co.

DECISION

SHEPPARD J By its application filed on 1 March 1993, the applicant sought an order that it be wound up by this Court under the provisions of the Corporations Law. It also sought an order that Peter David Rodgers be appointed as the liquidator of the applicant pursuant to the provisions of s.472 of the Corporations Law. On 26 February 1993, i.e. prior to the filing of the application and the affidavits in support thereof, a judge of this Court made orders which included an order that Mr. Rodgers be appointed liquidator of the applicant provisionally. The order was made pursuant to subsec.472(2).

2. The petition was heard on 21 April 1993. The Court reserved its decision. There was no issue concerning the making of an order winding up the company. The issue which occupied the time of the Court was whether Mr. Rodgers should be appointed liqidator. At the hearing, Mr. Chippindall of counsel appeared for the applicant and Mr. Tregenza of counsel for 12 creditors named in a notice of motion filed in Court on 21 April 1993. The 12 creditors are all companies engaged in the timber industry. That was the industry in which the applicant was engaged. The 12 creditors objected to the appointment of Mr. Rodgers and sought, instead, the appointment of Mr. J.B. Harkness, he having been nominated for the appointment in the event that the provisional liquidator, Mr. Rodgers, is not appointed.

3. In evidence is a report as to affairs of the applicant dated 1 April 1993. It reveals that the estimated amount available for unsecured creditors was, as at 26 February 1993, $516,009.44. It discloses that there were unsecured creditors who were owed amounts which totalled $664,904.42. The report, accordingly, revealed a deficiency of $148,894.98. The most valuable of the applicant's assets was the amount owed to it by sundry debtors which was said to amount to $463,200.01. Stock detailed in an inventory was said to be likely to realise $82,000 and plant and equipment, $29,595. The debtors and the unsecured creditors were listed in the report. The unsecured creditors numbered amongst them the 12 creditors who appeared at the hearing to oppose Mr. Rodgers' appointment as liquidator. The amounts of their debts constitute just over 50 per cent of the total indebtedness of the applicant.

4. The evidence in opposition to Mr. Rodgers' appointment consisted of an affidavit from the opposing creditors' solicitor, Mr. K.M. Harkness (no connection with or relation to the liqidator proposed by those creditors). Mr. Harkness was cross-examined. No representative of any of the creditors for whom he appears gave evidence. The case was one in which the objection to Mr. Rodgers' appointment was voiced by the creditors' solicitor and not by them directly. Mr. Rodgers swore an affidavit in answer to Mr. Harkness' affidavit and was also cross- examined. In addition to the report of affairs earlier referred to, there were tendered draft minutes of a meeting of creditors held on 6 April 1993, a summary of Mr. Rodgers' receipts and payments for the period 26 February to 20 April 1993, a facsimile letter dated 25 February 1993 from a company, Big River Timbers Pty. Limited ("Big River Timbers"), to the applicant's directors and a bundle of faxed copy letters dated 15 April 1993 from most of the creditors for whom Mr. Harkness appears.

5. Annexed to Mr. Harkness' affidavit is a circular to creditors dated 2 March 1993. The circular advised creditors of Mr. Rodgers' appointment as provisional liquidator. It said that the company had ceased to trade and that an investigation of the affairs of the company had commenced. Details of the likelihood of any distribution of funds and further information would be forthcoming upon completion of the investigation. In a report to creditors dated 5 April 1993, Mr. Rodgers said that a sale of the majority of the stock of the company to Big River Timbers "on the same terms as made known to the Court" was reviewed by the provisional liquidator, i.e. Mr. Rodgers, and "as it was in the best interests of creditors, the provisional liquidator completed the sale." The report said that the funds received from the sale were diminished following claims by suppliers under "Romalpa and Retention of Title clauses" which the provisional liquidator considered to be valid. "Romalpa" is a reference to the decision of the English Court of Appeal in Aluminium Industrie Vaassen BV v. Romalpa Aluminium Limited (1976) 1 WLR 66.

6. The report stated that further negotiations were then "successfully completed". These allowed for the sale of some sundry stock and plant to Big River Timbers. The sale of assets to that company was said to have provided a significantly higher return than would otherwise have been obtained from an auction of the assets. Items not sold to Big River Timbers were sold at auction. The report said that the debtors' ledger of the company as at the date of the appointment of the provisional liquidator stood at $592,000. Action to recover the outstanding debts had been commenced. Reference was made to the report of affairs and to the indication of an overall deficiency of $148,894. The report concluded by saying that it was expected that the company would be placed in official liquidation in the near future.

7. On 14 April 1993, Messrs. Harkness and Co. wrote to the applicant's solicitors. The letter informed them that Mr. Harkness' clients did not agree to the appointment of Mr. Rodgers as liquidator. Mr. Harkness said that his clients were concerned that the business of his company was effectively sold to Big River Timbers as a going concern "but that the price obtained was little more than the auction value of some equipment plus the purchaser's selection of most of the stock at cost price." Mr. Harkness added that this had been done without "the specific authority of the Court" and without consultation with creditors. Reference was made to the report of 5 April 1993. It was said that at an informal meeting on 6 April 1993 the directors of the company and the provisional liquidator had conceded "that there had been no prior sale and indeed no formal offer in respect of the stock".

8. A further matter raised by Mr. Harkness was concern on the part of his clients that one of the directors of the company, Mr. Hugh Knox, had continued on with the business as a manager, but in the employ of Big River Timbers, which was said to be a debtor of the company with whom it was in dispute as to the amount owed.

9. The applicant's solicitors' response to this letter dated 15 April 1993, said that the applicant had instructed them to press for the appointment of Mr. Rodgers as liquidator.

10. In his affidavit, Mr. Rodgers made a more up to date report of his administration of the company's affairs since his appointment. He said that he had concluded an arrangement negotiated by the company's directors prior to his appointment with Big River Timbers concerning the sale of stock. He had sold certain other assets, being stock, plant and equipment, which had been sent to auction. He had taken steps to collect the amount of about $600,000 owing by debtors. He had obtained possession of the books and records of the company and commenced investigations into its affairs in accordance with the provisions of the Corporations Law.

11. Mr. Rodgers said that he had no reason to believe that he should not act as liquidator of the company. He believed it to be in the best interest of the creditors that he continued to act. For him not to do so would involve the incurring of additional costs, inferentially because a different liquidator would need to familiarise himself with the company's affairs.

12. Mr. Rodgers referred to an affidavit sworn by Mr. M.R. Briggs, one of the directors of the company, in support of the application for the appointment of a provisional liquidator being dealt with urgently by the Court. Mr. Briggs set out his understanding of the company's financial position, it revealing a deficiency of approximately $90,000. He said that he did not believe that the company had sufficient income to meet its total debts as and when they fell due. He said that for some time the company had been negotiating with Big River Timbers for the sale to it of certain of the company's stock for an amount of $110,000 but that Big River Timbers had refused to deal with the company because of its financial position. Mr. Briggs said that the directors of Big River Timbers had told him that it would only deal with a provisional liquidator. Mr. Briggs said that it was the intention of the directors to accept the offer made by Big River Timbers for the purchase of part of the company's stock and that thereafter the provisional liquidator attend to the collection of outstanding debts and to the sale by auction of the residue of the stock and plant.

13. Mr. Briggs made it clear that the company was not, in the directors' view, in a position to continue to trade. He referred to a resolution unanimously passed by the directors that the company cease trading and that application be made for the appointment of a provisional liquidator and, further, that Mr. Rodgers be appointed to this position.

14. Mr. Briggs was not cross-examined.

15. In his affidavit, Mr. Rodgers confirmed, so far as he was able, what Mr. Briggs said about the negotiations with Big River Timbers prior to his appointment as provisional liquidator.

16. Annexed to Mr. Rodgers' affidavit is a letter from Big River Timbers dated 25 February 1993 which says that, upon an order being made for the liquidation of the company, Big River Timbers would pay to the liquidator the sum of $100,006 forthwith being for stock as identified in a stocktake on 19 February 1993. The amount was said to be subject to adjustment as agreed between the directors of both companies.

17. Mr. Rodgers said that immediately after his appointment, he employed a firm of valuers and auctioneers, Gray Eisdell Timms. They made a full inventory of the company's stock and plant. Mr. Rodgers said that, from discussions he had had with the directors of Big River Timbers, he learnt that the applicant acted as "a de facto franchisee" for Big River Timbers for the sale of certain stock licences and "had a vested interest in obtaining the designated stock that constituted the offer" prior to his appointment. He said that Mr. Pidcock of Big River Timbers had confirmed to him that the conditions of sale referred to had been offered.

18. Members of Mr. Rodgers' staff liaised with the auctioneer who provided a letter dated 26 February 1993 indicating his opinion of the value of the stock. He thought that the stock should be split into two parts, item A and item B. The former should be auctioned on site and could be expected to realise $60,000 to $65,000 less commission of 15 per cent and a further 2 per cent for advertising and handling. Stock comprised in item B could be expected to realise $14,000 to $17,000 less commission, advertising and handling charged at the same percentages as applied to item A.

19. Mr. Rodgers said that the figure of $110,000 offered by Big River Timbers was affected by some of the stock being the subject of retention of title clauses until payment. There had also been sales in the interim period. Mr. Rodgers was advised by his solicitors that it would not be necessary for him to seek the approval of the Court to a realisation of the stock "along the lines" suggested in Mr. Briggs' affidavit "because it had in fact been covered" in the information placed before the Court." That was a reference to Mr. Briggs' affidavit. Mr. Rodgers thereupon concluded the transaction with Big River Timbers. He received a cheque for $76,902.16. He referred to Big River Timbers "immediate sale requirements". By this I take him to mean that Big River Timbers was not prepared to leave the offer open for very long.

20. Paragraph 17 of Mr. Rodgers' affidavit is as follows:-
"17. I then proceeded further with Big River Timbers Pty.

Ltd. as to the remaining stock and plant of Stadbuck Pty.
Ltd. and in consultation with Gray Eisdell Timms was able to
make a sale of certain plant but no further stock to Big
River Timbers Pty. Ltd. over and above gross auction values.
The offer received from Big River Timbers Pty. Ltd. amounted
to $14,041.00. The auction value of the items purchased
totalled $10,850.00 and allowing for cost of commission at
15%, the net result under auction would have been to the
order of $9,222.00 less incidental costs."

21. The balance of the stock and plant and equipment were forwarded to the auctioneer for auction.

22. Mr. Rodgers said that he had undertaken a considerable volume of the work which would be required to be undertaken by a liquidator. He attached a summary showing what he had done. I do not refer to the detail of it.

23. In his oral evidence, Mr. Rodgers was asked questions about his first contact with the company. He said that the directors came in to see him a day or two before the application for the appointment of a provisional liquidator. He said that he had had no recent contact with Big River Timbers but, some 15 or 20 years ago in his capacity as receiver for one of the banks, he had bought and sold to Big River Timbers, "not always, shall we say, on a totally friendly basis". Counsel for the creditors did not rely on any matter connected with this earlier dealing by Mr. Rodgers with Big River Timbers.

24. Subject to some qualifications, Mr. Rodgers said the company was not trading when he was consulted and that the directors were seeking to maximise its assets for the benefit of creditors. He pointed out that the directors themselves were amongst the company's creditors. Mr. Rodgers' evidence proceeded as follows:-

"And is there any reason why you did not advertise the
business? ---Yes, quite simply, Mr. Chippindall, Mr.
Pidcock, while all this was going on was stomping up and
down in my foyer saying he would not deal with anybody other
than a properly appointed administrator and if the deal was
not done forthwith he would withdraw his cheque. He had
this cheque for $110,000 and he had the agreement of the
directors that they would sell to him but he was not
prepared any longer to deal with the directors.
Mr. Pidcock, I take it, being an officer of Big River
Timbers? ---Yes, he would be the big white chief there in
there, I presume now that his father is not so active, yes.
He would be a big player in the timber industry in
Australia, a very reputable man but a very hard one.
And when actually did you consummate the sale? ---Well, we
called in Gray, Eisdell, Timms to give us a valuation and we
compared the figures that we could get if we went through
the auction value versus the figures that we could get by
Pidcock and we then tried to squeeze Pidcock as much as we
could to paying the benefit of other stock and other plant
and machinery. In the ultimate we put that to one side and
only looked at the deal that already had been put in place
by the directors in Pidcock and went separately for that.
Subsequently we then tried again to deal with Pidcock, both
as to plant and machinery and as to stock and to use a
colloquial term, sir, in the interests of expediency, tried
to screw him harder; in respect of the plant and machinery
we managed to get $5000 over and above the auction value.
In respect of the stock we could not get him any higher on
the stock as we had already cleaned him out for $30,000 over
and above the auction value in respect to the previous stock
and he reckons that he had done all that he need do towards
the purchase of goodwill, so we let it go at that and we
sent the remaining stock to auction and we sold portion of
the plant and machinery to Big River where we felt we had
gained a benefit of some $5000 over and above.
And what in your view was the alternative to the course that
you took? ---Take $50,000 on the auction block or $80,000
from Big River.
HIS HONOUR: Why do you say $50,000 on the auction? How do
you know that that is what it would be auctioned at? ---We
got a letter from Gray, Eisdell, Timms valuing the stock for
us, your Honour. I say 80, I am sorry, the figure was 76
that we received, not 50. Gray, Eisdell, Timms' figure for
that appropriate stock was 50, the Big River Timbers figure
was 76, not 80, I am sorry, I retreat back from the 80 to
76. I am mentally adding in several thousand dollars for
the extra price we got on the plant and machinery. We put
Mr. Pidcock up against the wall and tried to beat his brains
out and only to the extent of portion of the plant and
machinery could we improve the situation."

25. Mr. Rodgers was subjected to a close cross-examination. Amongst other things, Mr. Rodgers said that it was, to the best of his recollection, on the second of the days that he made investigations of the company's affairs that the incident involving Mr. Pidcock occurred. It was before his appointment as provisional liquidator.

26. Contrary, I think, to the expectation of the cross-examiner, Mr. Rodgers revealed that he had had a substantial experience in the timber industry because of previous receiverships and liquidations in which he had been involved. I accept this evidence. He was asked what enquiries he had made of persons other than the company and Mr. Pidcock to ascertain the company's value as a going concern. His evidence continued:-

"Till I reached that on my own inquiries of the directors
insofar as I tried to ascertain if there was a business that
could be sold they both emphatically replied that there was
not a business that could be sold and after my discussions
with Pidcock and ascertaining that he was in fact supplying
them with the customer list and with the timber I discovered
that there was in fact little business outside of the
business supplied by Big River to Stadbuck. I came to my
own conclusions there, sir.
HIS HONOUR: What were the pros and cons about you having
called - it might not have been a complete meeting, but an
informal meeting if you like of creditors before you did
this just so that you could test their reaction to it? Did
you think of that or was there some reason why you did not
do it? ---Yes, there was a reason, your Honour. Mr. Pidcock
was quite absolute that he wanted to. We checked with our
legal advisers who told us that there was not a necessity
either to approach the court but it lay on our own
commercial judgment. We would not have had time to convene
a meeting of creditors. I also took note, your Honour, that
if the deal with Big River did not go forward perhaps some
$30,000 would be lost to creditors and the shortfall for
creditors was relatively - you know, this is not going to be
one paying two cents, three cents in the dollar. It should
pay a significant distribution of creditors.
I could not work out what your expenses were likely to be
but it may pay up to 30 cents in the dollar or something
like that? ---Sir, it could go much higher than that.
You think it could go higher than that? ---I think it could
go higher than that.
The main source of funds has been the payment of debts? ---
That is correct. And a reasonable realisation on the timber
rather than pushing it through the auction block. There
wasn't any value in the goodwill, although I did achieve
$30,000 for admin."

27. Mr. Rodgers was asked why he said there was no time to call an informal meeting of creditors. He said that sometimes that course was taken but he had "the pressure of Mr. Pidcock on me ... He was quite adamant that he wanted to do it literally half a second after the courtroom. We did not do it then. We brought in Gray, Eisdell, Timms." Mr. Rodgers acknowledged again that Mr. Pidcock was applying pressure on the company and on him. It was suggested that this pressure distracted Mr. Rodgers from making some independent assessment of the value of the business as a going concern. He replied:-

"I repeat sir, and I repeat two points that I have already
made, the first one was that the business was totally
dependent on the Pidcock and Green that they continue to
purchase timber from Big River and sell to customers of Big
River. The directors had already told me without that input
the business had no value. Secondly, I think I have to
explain that by being able to sell to Pidcock all up I
achieved another $30,000 that I would not have otherwise
achieved. I do not believe that the business had any
goodwill. I also felt that I was taking a risk if I delayed
the discussions with Pidcock because he was most emphatic in
his approach of securing that customer list."

28. It is not unfair to the cross-examiner to say that the cross-examination then became a series of allegations put in the form of questions. These were denied quite vehemently by Mr. Rodgers. There are a number of other answers he gave along the lines of those earlier quoted. It is not profitable to quote more.

29. It was agreed that there was no sale before the provisional liquidation, but Mr. Rodgers said that he could be "very exposed" if he did not conclude that which the directors had started unless he had something better.

30. Later in his cross-examination Mr. Rodgers said that Mr. Pidcock wanted control of a list known in the trade as a "sucker list". I take this to be a reference to the customer list already referred to in his evidence. Mr. Rodgers said sucker lists were sold quite frequently in the timber industry. He explained the nature of a "sucker list" as follows. He said a deal had been struck several years ago between Big River Timbers and the applicant whereby Big River Timbers would allow the company to buy timber from it and sell it to Big River Timbers' customers. There was a special invoice book kept. Copies of the invoices were sent by facsimile to a camp near Grafton operated by Big River Timbers where the timber was being felled. Mr. Rodgers said that he presumed that Big River Timbers typed up another invoice so that the customers of the company were in fact the customers of Big River Timbers. But, so far as the customers were concerned, they were customers of the company.

31. I am not sure that I have fully grasped the nature of a sucker list, but it appears to be a list of names or customers. It should be clear, however, that it is not a list which has any sinister significance. The expression appears to have been derived from the use of the word "sucker" to denote a stem or shoot from the root of a tree. Those with access to a list are able to "feed" on it just as a sucker feeds on the root system of an established tree.

32. Mr. Rodgers said, "... if you can get hold of the list, then this is good news." According to Mr. Rodgers, the list had a value and that was what Mr. Pidcock wanted. He wanted the list along with the timber. Mr. Rodgers agreed that Mr. Pidcock was receiving, not only the value of the timber, but also the value of the sucker list. His evidence continued:-

"In fact, by providing to him the sucker list, you are
giving him commercial details which might be best described
as part of the goodwill of Stadbuck? ---He already actually
had them because he had been receiving these invoices as
Stadbuck raised them, but certainly it would have been
possible in two ways for things to flow from that and that
was that the Stadbuck directors could have interfered to
some degree and make his life difficult, but probably more
importantly is that I had to collect those debtors
throughout the range. Now, if you can avoid disharmony
between the parties while you go out and collect in this
case the largest asset of the company, because the moment
you say, guess what, a liquidator is appointed, the debtor
says, 'I won't pay', and this way we had the smooth
transition and I go in happily and collect as Stadbuck with
the assistance of Mr. Pidcock with access to the records to
follow through and various other things."

33. Mr. Rodgers was pressed for the reason why the existence of the sucker list was not disclosed to creditors. He said that he thought that it had been mentioned in Mr. Briggs' affidavit and in his own in words used by him to creditors to the effect that, instead of getting bare auction values or bare timber values, he was able to improve the values that could be obtained. He added that, when he said that he had sold the business as a going concern to the extent that it could be preserved, "that" (meaning the existence of the sucker list) was encompassed. He said that you could not advertise the sucker list for sale because "Mr. Pidcock, de facto, owned it." He had the invoices and the ability to approach the purchasers and thus to do business with them.

34. Questions were then asked to suggest that the auctioneer's valuation was misleading because it did not take the sucker list into account. He was asked why he did not consider that he was in a position to take a stronger negotiating position. He said the reason he was not, related to the collection of debts. He had tried as much as he could to obtain the best result.

35. He was then asked whether he had considered calling a meeting of creditors for the purpose of seeing whether creditors who were timber merchants themselves might be interested in bidding for the sucker list, along with the timber. Mr. Rodgers said that, based on his own commercial knowledge, that would not have been practical. He said the sucker list was not available to anyone else; it had no value except to Big River Timbers. The inference was that, if it did not acquire it, nobody would. Later he said the sucker list was not capable of being sold to anyone. He added, "... what I sold him was that I wasn't going to kind of cause him trouble." He added:-

"They were his (Mr. Pidcock's) customers, he supplied me the
wood and I sold to his customers for which I got a
commission which made me viable, a Stadbuck, so I could not
really sell the sucker list to anybody else; all he would do
would be to drive straight in and cause me troubles. But
then, on the same hand I was promising that I would not
cause him troubles for which I got not 51,000 but 76,000."

36. In re-examination, Mr. Rodgers dealt with what had to be done to finalise the liquidation. I do not go to the detail of this evidence, but the effect of it is that a great deal of the work necessary to complete the administration for the winding up is complete.

37. In his affidavit, Mr. Harkness gave an account of the meeting of creditors held on 6 April 1993. The unconfirmed minutes of that meeting are in evidence. There is no difference of substance between the account given by Mr. Harkness of what occurred and what is to be found in the minutes. The minutes deal with a number of matters not referred to by Mr. Harkness. I do not refer to the minutes further, but I have taken them into account.

38. In his oral evidence, Mr. Harkness suggested that Mr. Rodgers had led the meeting to think that the sale to Big River Timbers was complete before he was appointed provisisonal liquidator. That is not Mr. Rodgers' account of what he said, and the minutes do not suggest that he said that the sale was a fait accompli or anything to that effect before his appointment as provisional liquidator. However, the statement in his report to creditors of 5 April 1993 that a sale of the majority of the stock of the company to Big River Timbers Pty. Limited, on the same terms as made known to the Court, was reviewed by the provisional liquidator ...", is ambiguous because it suggests that the directors had in fact effected a sale when that was not the case. The reality appears to have been that Mr. Pidcock told Mr. Briggs that he would not deal with the directors; he would deal only with a provisional liquidator.

39. In the course of his evidence, I asked Mr. Harkness to spell out his understanding of his client's objections to Mr. Rodgers' appointment as liquidator. He said that he thought that, at the least, Mr. Rodgers should have consulted with the creditors before dealing with what was effectively their property in the event of an insolvency. He said that it seemed that Mr. Rodgers had acted very quickly and without the consultation with the interests which were most closely involved. He said that he thought it would have been a simple matter for Mr. Rodgers to have consulted with the people who stood to win or lose and thereby protected himself from any complaint. He said that, for these reasons, Mr. Rodgers did not have the confdence of the creditors for whom he acted.

40. As mentioned, Mr. Rodgers was closely cross-examined. He gave evidence under some difficulty. He was suffering severely from back pain for the treatment of which he was to enter hospital the following day. The excerpts from his evidence which I have quoted show that he expresses himself colourfully and directly. His vehement and robust manner matches the language he uses. I do not think that he would have given evidence very differently if he had been well. I think that this is his way and his manner. But I have no criticism of this. Mr. Rodgers is a realist. He has had long experience as a receiver and a liquidator. I accept the evidence he has given in its entirety. I have no qualms whatever about his credibility.

41. On the evidence before me, I am satisfied that the actualities of this matter are such that Mr. Rodgers acted throughout in good faith and did his best in all the circumstances to obtain the best prices he could for the stock, plant and equipment. The evidence does not establish any breach of duty or obligation on his part. He thought it was necessary to act quickly and that delay might well operate to reduce substantially the amount which would be recovered. He was concerned that, if he did not act quickly, the transaction with Big River Timbers might go off.

42. Although that is the actuality of the situation, it is not the end of the consideration which needs to be brought to bear on the question whether he should be appointed liquidator. Appearances and perceptions in this area are also important. It is important that creditors have confidence in the person appointed to act as liquidator. If they lack that confidence, one needs to consider whether it is appropriate to make the appointment even though one is satisfied that the appointment would be an appropriate one. In some cases, it will be preferable for the costs and expenses of a winding up to be somewhat higher than would be the case if the provisional liquidator were appointed liquidator, than for a liquidator to be appointed in whom there is a lack of confidence.

43. Of course, creditors must themselves act reasonably and responsibly. Capricious or unfounded objections ought not be given effect to. And there may be cases, of which this is one, where, although some creditors, even a majority of them, are concerned about the proposed appointment of the provisional liquidator, others are content with his appointment.

44. One of the matters which has concerned me in this case is the absence of evidence from any of the creditors who object to the appointment. No affidavit was sworn by any executive of any of them; they chose to speak through their solicitor and counsel and to rely on the facts as they emerged in evidence including their counsel's cross-examination of Mr. Rodgers. The Court was thus denied the benefit of direct evidence from the creditors and, particularly, an explanation from at least one of them of the reasons for their anxiety.

45. I confess that I do not understand why no creditors' representative was called. I have been tempted to speculate about the matter. In the absence of direct evidence, it seemed to me that the reason for the opposition of creditors who were in the timber trade, may have stemmed from their disappointment at not having an opportunity of obtaining the sucker list. I am satisfied, on the basis of the uncontradicted evidence of Mr. Rodgers, that the sucker list was not in fact of use or of value to anyone except Big River Timbers.

46. It is true to say, I think, that Mr. Rodgers' reference to the sucker list caught counsel and the solicitor for the opposing creditors by surprise. It did not appear that they had heard of it previously. And I must say that I do not think that Mr. Rodgers' claim that the list was inferentially mentioned in Mr. Briggs' affidavit and in Mr. Rodgers' own evidence is substantiated. Perhaps the initiated might have realised the position, but it was certainly not apparent to persons unfamiliar with the trade such as myself. Once the list was mentioned, it became apparent to me why Mr. Pidcock was so anxious to acquire the timber. The advantage to the applicant and its creditors, in Mr. Rodgers' view, was, not only an increased price for the timber, but also an increased likelihood of co-operation from the applicants' debtors from whom he had to collect money.

47. If the opposing creditors' legal representatives were caught unawares by the mention of the sucker list, it was open to them to seek an adjournment of the hearing to obtain instructions. So far as I could tell, there was no representative of any of the creditors in Court to give them instructions - a matter in itself somewhat strange in the light of the expressed strength of the opposition to Mr. Rodgers' appointment - but, if an application for adjournment had been made, I would have had little hesitation in granting it.

48. A matter I must consider is the fact that Mr. Rodgers, before his appointment as provisional liquidator, conferred extensively with the applicants' directors about what should be done. Coupled with this is the matter earlier mentioned that Mr. Pidcock would deal only with a provisional liquidator. Unquestionably there is a risk that an accountant may, however subconsciously, tend to favour those who have originally consulted him and may, the more readily, fall in with arrangements already made prior to the filing of an application for winding up. Mr. Rodgers' evidence satisfies me that he was aware of this danger and did not in fact act as he did because of some loyalty to the directors. He was intent on acting for the benefit of the applicant and its creditors as a whole. Again, however, the appearances need to be considered. But, in the absence of evidence from any of the creditors, it is difficult to give this matter substantial weight. What I must do is to endeavour to make an appointment which, in all the circumstances, is in the best interests of the general body of creditors and of the proper winding up of the company. In this respect, I bear in mind that the opposing creditors constitute, although a majority in value of the creditors, little more than a bare majority of them. The remaining creditors support the appointment, or at least, do not oppose it.

49. I must be careful, I think, not to decide the matter subconsciously or otherwise as if it were one in which any interest carried an onus. The opposing creditors do not carry the onus of establishing that Mr. Rodgers "not be appointed". On the other hand, as I have earlier indicated, their case is weakened by the failure of any of their executives to give evidence. I feel constrained to refer again to my puzzlement as to why none was called.

50. Undoubtedly, the appointment of a liquidator other than Mr. Rodgers will involve not insubstantial additional expenditure in relation to the winding up. That is important, although not, of course, a decisive factor and it must be taken into account.

51. Having considered the various matters to which I have referred, I have reached the conclusion that the applicant's best interests, and those of its general body of creditors, will be better served by Mr. Rodgers' appointment than by the appointment of someone else. I propose, therefore, to make orders for the winding up of the applicant and for the appointment of Mr. Rodgers as its liquidator.