Foti v P & S Investments Pty Ltd [2009] FCA 1409 (2 December 2009)

Last Updated: 2 December 2009

FEDERAL COURT OF AUSTRALIA

Foti v P & S Investments Pty Ltd [2009] FCA 1409

CORPORATIONS – application that administration be brought to an end under s 447A of Corporations Act 2001 (Cth) because administrators appointed for improper purpose – where administrators appointed by director by reason of that director discharging company debt and acquiring a charge over the company’s assets – where director proposed Deed of Company Arrangement in which he would contribute funds and forgo debts in exchange for shares in the company – where application to end administration made by only other director and shareholder – whether predominant purpose of appointing administrators was to gain control of company or to avoid investigation by liquidator

Held: application dismissed – not surprising that director required shares in return for funds – unlikely that there would be any net equity in assets available to shareholders – evidence that director intended to provide return to creditors and secure orderly sale of assets

Corporations Act 2001 (Cth) Part 5.3A, ss 435, 436, 439A, 447, 459A, 459P, 461, 462, 447A

Aloridge Pty Ltd (prov liq apptd) v Christianos [1994] FCA 972; (1994) 13 ACSR 99 discussed
Blacktown City Council v Macarthur Telecommunications Pty Ltd (admins apptd) [2003] NSWSC 883; (2004) 47 ACSR 391 discussed
Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607 referred to
Milankov Nominees Pty Ltd v Roycol Ltd (1994) 52 FCR 378 referred to
Spacorp Australia Pty Ltd v Fitzgerald (2001) 19 ACLC 979 discussed
St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd (admins apptd) [2004] NSWSC 851; (2004) 50 ACSR 443 discussed
Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 referred to

PASQUALE ALFREDO FOTI v P & S INVESTMENTS PTY LTD ACN 094 734 988

SAD 128 of 2009

BESANKO J
2 DECEMBER 2009
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	SAD 128 of 2009

BETWEEN:	PASQUALE ALFREDO FOTI Plaintiff
AND:	P & S INVESTMENTS PTY LTD ACN 094 734 988 Defendant

JUDGE:	BESANKO J
DATE OF ORDER:	2 DECEMBER 2009
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1. The application of the plaintiff that the administration of P & S Investments Pty Ltd be brought to an end be refused.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	SAD 128 of 2009

BETWEEN:	PASQUALE ALFREDO FOTI Plaintiff
AND:	P & S INVESTMENTS PTY LTD ACN 094 734 988 Defendant

JUDGE:	BESANKO J
DATE:	2 DECEMBER 2009
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1. On 27 August 2009, Mr Pasquale Alfredo Foti issued a proceeding in this Court against P & S Investments Pty Ltd (“the company”) in which he sought an order that the company be wound up in insolvency. Mr Foti is a director and shareholder of the company. On 5 November 2009, Mr Scott James Salisbury appointed administrators to the company under Part 5.3A of the Corporations Act 2001 (Cth) (“the Act”). Mr Salisbury is also a director and, through a company he controls, a shareholder of the company. Mr Foti has issued an application under s 447A of the Act seeking an order that the administration of the company is to end. Mr Foti claims that such an order should be made because provisions of the Act are being abused (s 447A(2)(b)). In particular, he claims that Mr Salisbury, in appointing the administrators, had an improper purpose or a purpose collateral to the purposes for which the power could be exercised. Mr Salisbury opposes the application. He does not contend that an improper purpose is not a basis upon which an order under s 447A(1) and (2) may be made, but he claims that Mr Foti has not established that he had such a purpose. The administrators have appeared, but they have not taken part in the argument. The administrators have prepared a report for the assistance of the Court and that report has been put before me. It is not a report to creditors under s 439A of the Act, although it has some similarities to such a report. Many of the conclusions and opinions expressed in the report are provisional because the administrators have not completed their investigations.
2. On 26 November 2009, I made an order that the application of the plaintiff that the administration of P & S Investments Pty Ltd be brought to an end be refused. I said that I would deliver reasons and these are my reasons.
3. The company carries on a business involving the purchase, development and sale of properties. It has not commenced any new projects since June of this year. As I have said, the company’s two directors are Mr Foti and Mr Salisbury. The company’s issued capital consists of four $1 ordinary shares, two of which are held by Mr Foti and his wife and the other two of which are held by S J Salisbury Investments Pty Ltd. Mr Salisbury is the sole director, secretary and shareholder of S J Salisbury Investments Pty Ltd. For present purposes, there is no need to draw a distinction between Mr Salisbury and his company.
4. There is evidence before me which indicates that the business and affairs of the company were conducted in a way similar to the way in which the business and affairs of an ordinary partnership are conducted. The business and personal relationship between Mr Foti and Mr Salisbury has broken down.
5. Mr Foti’s application for the company to be wound up is made under s 459A of the Act and he seeks the leave of the Court to make the application as a director of the company (s 459P(1) and (2)). S J Salisbury Investments Pty Ltd filed a notice of appearance in the proceeding in its capacity as a contributory of the company and it opposed the application on the ground that the company was not insolvent. In its notice of appearance it contended that the Court should decline to exercise its discretion to wind up the company on the basis that it was not in the best interests of the creditors or shareholders of the company for the company to be wound up and on the basis that the application had been brought for an improper purpose.
6. On 14 October 2009, Mr Foti amended his Originating Process to include a claim under s 461(1)(k) and s 462(2)(c) of the Act. In other words, he claimed, as a contributory of the company, that it should be wound up on the ground that it is just and equitable to do so. On 11 November 2009, Mr Foti issued an application seeking an order that there be summary judgment on his winding up application. Mr Foti made it clear during his submissions that had I made an order that the administration end, he would then ask me to deal immediately with his application for summary judgment.
7. On 4 November 2009, a mediation was held before a Registrar of this Court. The mediation did not lead to a resolution of the proceeding.

The financial position of the company

8. The precise financial position of the company is far from clear. It is clear and it was common ground between the parties at the time this application was argued that the company is insolvent. In their report, the administrators express the view that the company may have been insolvent in June 2009 and possibly before that date.
9. In terms of assets, and putting to one side possible recovery actions against directors and interests associated with them, the company’s main assets are two apartments in a project called in the evidence the Tivoli Apartments and Hotel Redevelopment Project. Those apartments have been on the market since August 2008 but they have not been sold. One of the apartments is let. The apartments were, until 5 November 2009, subject to security interests in favour of the Bank of South Australia, as a division of St George Bank Limited, (“the Bank”) securing a loan by the Bank to the company of approximately $1.6 million. On 5 November 2009, Mr Salisbury became the assignee of the Bank’s debt and he holds the security interests. There is also a lien over the apartments securing an alleged debt of approximately $763,000 to a business called Built Environs. Liability for this debt is disputed by both Mr Foti and Mr Salisbury.
10. If the claim by Built Environs is established, there is and will be no net equity in the two apartments. If the claim fails, it is at present unclear whether there is and will be any net equity in the two apartments. The administrators suggest it is possible that there may be net equity in the two apartments of between $50,000 and $300,000.
11. The company has a number of other possible creditors. I say possible creditors because a number of the alleged debts are disputed by the directors.
12. I start with possible creditors who are unrelated to the directors or interests associated with them. According to the administrators’ report and the proofs of debt lodged, they total $4,336,532.48. Of this amount, the amount admitted for voting purposes at the first meeting of creditors by the administrators was $541,451.55. A number of the major debts are disputed by either both the directors, or one of them.
13. The related party claims involve Mr Foti and Mr Salisbury or interests associated with them. Each director strongly disputes the claims of the other. Mr Foti claims that the company owes him an amount of $2,094,837.42. The administrators admitted for voting purposes at the first meeting of creditors an amount of $609,202. Mr Salisbury claims the company owes him an amount of $7,576,625 (including the secured debt). The administrators admitted for voting purposes at the first meeting of creditors an amount of $1,928,471.
14. Mr Foti claims that conduct by Mr Salisbury in relation to two transactions was improper and, in fact, led to the company’s insolvency. The first transaction involved land at Wallaroo owned by the company (with others) which was sold in August 2009. Mr Foti claims that, in breach of duty, Mr Salisbury claimed the sum of $320,000 from the proceeds of sale which moneys should have been paid to the company. The second transaction involved property on King William Street. This land was not owned by the company but rather owned by another company which owed a large debt to the company. Mr Foti claims that, in breach of duty, Mr Salisbury claimed the sum of $777,959 from the proceeds of sale which moneys should have been paid to the company in discharge of the debt owed to it.
15. In their report, the administrators set out details of other possible unreasonable director-related transactions (see s 588FDA of the Act. Including the above transactions, they total $3,247,894 and involve substantial amounts, both in the case of Mr Foti and in the case of Mr Salisbury.
16. The evidence is to the effect that Mr Salisbury wishes to put a proposal to creditors with a view to the execution of a deed of company arrangement. At the time submissions were heard, the terms of a proposal were not firmly fixed. In their report, the administrators summarised the “key terms of the proposal” as follows:
    • Salisbury would contribute a specific sum (now known to be $242k) (‘the Fund’) within 14 days after a resolution being passed by creditors pursuant to Section 439C(a) of the Act;
    • This proposal is subject to the current application to wind up the Company being dismissed by the Court or otherwise discontinued.
    • Salisbury will not seek to prove in respect of the debts owed to him in his capacity as secured creditor or otherwise and these claims total $7.576m with $1.928 admitted for voting at the first meeting of creditors;
    • In return for payment of the Fund the Company will issue Salisbury shares in accordance with its constitution at a par value of $1 per share being the amount subscribed (i.e. 242,000 shares, thereby holding 242,002 of the 242,004 shares in the Company after the issue);
    • Salisbury in his capacity as secured creditor will be bound by the DOCA until the payment of the Fund.
    • Based on the admitted debts for voting purposes at the first meeting, Salisbury considers the established creditors in a DOCA would be approximately $1.15m including Foti interests of $609k. The fund would be available to these creditors.
      
17. The submissions made to me proceeded on the assumption that a company could issue shares as part of a deed of company arrangement. That assumption may be made for present purposes, although it was never tested.
18. In their report, the administrators set out their provisional views on the advantages and disadvantages to creditors of accepting Mr Salisbury’s proposal and the likely return to creditors, and the advantages and disadvantages to creditors of the company going into liquidation and the likely return to creditors. The administrators’ views are provisional. Under Mr Salisbury’s proposal, the likely return to creditors ranges from about 2 cents to 14 cents in the dollar, whereas, should the company be placed in liquidation, the likely return to creditors ranges from nil to 25 cents in the dollar.

The appointment of the administrators

19. As I have said, as at 5 November 2009, the company was indebted to the Bank in the sum of approximately $1.6 million. The funds had been provided to the company by the Bank by way of a commercial bill facility which is due to expire on 30 November 2009. As I have said, the company’s liability to the Bank was secured by a registered mortgage over properties including the two apartments. The company’s liability to the Bank was also secured by two fixed and floating charges, the first dated 2 November 2001 and the second dated 20 September 2007. In addition, both Mr Foti and Mr Salisbury, as the directors of the company, had guaranteed the repayment of the company’s debt to the Bank.
20. Mr Salisbury and interests associated with him have been and are represented by Finlaysons, solicitors. Finlaysons wrote to the Bank on 30 October 2009. Their letter contains the following passages:

“We act for Mr Scott Salisbury and entities associated with him.

This letter is written to you on an entirely confidential basis and we ask that the contents are not to be communicated to any party without our client’s express consent.

Our client is aware of the facilities entered into between the bank and P & S and understands that firstly the bill supporting the facilities is due to expire on 9 November 2009 and secondly that the bank requires the repayment of the debt outstanding on account of the facilities by no later than 30 November 2009.

You would be aware that proceedings have been issued (without our client’s prior knowledge or consent) by Mr Foti in his capacity as a director of P & S Investments Pty Ltd seeking the winding up of the company. We expect that the bank would consider this to be an event of default.

Our client through the entity which holds the shares in P & S has opposed the application. Based on the limited financial information provided to the Court by Mr Foti, it seems to be common ground that P & S does not have current assets in the nature of cash or other readily convertible assets, to pay the debt out at that time.

That being so, Mr Salisbury wishes to pay out in full the amount outstanding by P & S to Bank SA and to effect that transaction in the near future. He is making arrangements to pay to our trust account the total amount due to the bank which he is prepared to tender to the bank on the basis set out in his letter and the enclosed draft deed. ...

You will appreciate that as part of this transaction, Mr Salisbury wishes to preserve his rights as a guarantor of the debt on paying this money to you, to retain the right to seek proper contribution from his co-guarantor Mr Foti.

Accordingly:

1. he would ask that the bank make a demand on him as a guarantor ...”
   
21. On 5 November 2009, Mr Salisbury paid out the company’s debt to the Bank and took an assignment of the Bank’s debt and securities. By notice dated 5 November 2009, Mr Salisbury appointed Martin David Lewis and David William Kidman administrators of the company. The notice contains, among other things, the following:

“Recitals

100. The company is in default of its obligations to the bank pursuant to the facilities and in particular the registered fixed and floating charges referred to in Recital B such that the securities are, within the meaning of section 436C of the Corporations Act 2001 (Cth) (the Act) enforceable.
     

5. By deed dated 5 November 2009, the bank has assigned in favour of Scott James Salisbury of 474B Anzac Highway, Camden Park, South Australia, 5038 (the assignee) all of its rights and interests in the facilities provided by it to the company and the securities in return for the assignee paying to the bank the amount outstanding by the company in respect of such facilities.
   

Now hereby take notice that Scott James Salisbury does, by this instrument, appoint each of you as joint and several administrators of P & S Investments with effect from the date of this instrument.”

Issues on the application

22. Mr Foti’s application is made under s 447A of the Act. That section is in the following terms:

“(1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.
(2) For example, if the Court is satisfied that the administration of a company should end:
(a) because the company is solvent; or
(b) because provisions of this Part are being abused; or
(c) for some other reason;
the Court may order under subsection (1) that the administration is to end.
(3) An order may be made subject to conditions.
(4) An order may be made on the application of:
(a) the company; or
(b) a creditor of the company; or
(c) in the case of a company under administration—the administrator of the company; or
(d) in the case of a company that has executed a deed of company arrangement—the deed’s administrator; or
(e) ASIC; or
(f) any other interested person.”

23. The power in s 447A(1) is a broad power. I refer to Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607; Milankov Nominees Pty Ltd v Roycol Ltd (1994) 52 FCR 378 which cases dealt with s 447A as it was in the Corporations Law.
24. Section 447A(2) provides an example of an order that may be made under s 447A(1). The Court may order that the administration of a company is to end, and the circumstances in which the Court may make such an order are set out in s 447A(2). One such case is where the Court is satisfied that a provision of Part 5.3A of the Act is being abused. In this case, Mr Foti claims that the provision of Part 5.3A which is being abused is the provision which gives a chargee the power to appoint an administrator (s 436C). Mr Foti claims that that provision is being abused because Mr Salisbury exercised the power for an improper purpose. Mr Foti claims that an improper purpose is one which is foreign to the purposes which lie behind the appointment of an administrator under Part 5.3A.
25. The purposes which lie behind the appointment of an administrator are to be gleaned from a consideration of Part 5.3A as a whole. Section 435A is of particular importance. That section is in the following terms:

“The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence – results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.”

26. It should also be borne in mind that the effect of an administration is to place the fate of the company in the hands of the company’s creditors. They may decide that the company will enter into a deed of company arrangement or that the administration will end or that the company will be wound up (s 439C). Voting by related creditors may be supervised by the Court (s 600A).
27. Mr Foti accepts that he carries the onus of establishing that Mr Salisbury had an improper purpose in appointing the administrators. He acknowledges that there is no direct evidence of that fact and he asks the Court to draw an inference of an improper purpose. Both parties referred to the decision of the High Court in Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 (“Williams v Spautz”). The case is not directly on point, but it does contain an analysis of the common law doctrine of abuse of process where the abuse is said to be the bringing of proceedings for a collateral purpose. Mr Foti accepts that he must show not only that Mr Salisbury had an improper purpose, but also that it was his predominant purpose.
28. Before examining the evidence, it is convenient to consider some of the cases which have addressed the circumstances in which the Court will find that an administrator was appointed for an improper purpose.
29. In Aloridge Pty Ltd (prov liq apptd) v Christianos [1994] FCA 972; (1994) 13 ACSR 99, Burchett J made an order under s 447A of the Act that the administration of a company end. A provisional liquidator had been appointed to the company and he was actively pursuing a number of disputes on behalf of the company, including a dispute about the charge held by the person who had appointed the administrator. In light of the facts, Burchett J drew the inference that the appointment of an administrator was made not for the purposes for which the Act makes provision, “but in order to wrest control of the affairs of the company away from the provisional liquidator in the hope that the administrator might prove more compliant” (at 102). In determining the purposes for the appointment of an administrator, Burchett J had regard to the object of Part 5.3A set out in s 435A.
30. In Spacorp Australia Pty Ltd v Fitzgerald (2001) 19 ACLC 979, Beach J made an order bringing the administration of a company to an end. He concluded that the action of a creditor of the company in appointing administrators was an abuse of process. The creditor had served a statutory demand on the company pursuant to s 459E of the Corporations Law. On an application by the company, the statutory demand was set aside. The creditor appealed and was successful. The company appealed to the Court of Appeal, and the time for compliance with the statutory demand was extended pending the determination of the appeal. At that point, the creditor appointed administrators to the company. Beach J found that, in the circumstances, the appointment of administrators was an abuse of process. His Honour said (at 982 [28]):

“Having chosen to serve a statutory notice on Spacorp with a view to having it wound up and been thwarted in the way it has, I think that it was totally inappropriate for Myer to seek then to attain its objective by appointing administrators. All the more so when it was well aware of the fact that the appeal was on foot and that the Court of Appeal had stayed the time for compliance with the statutory notice until after the hearing and determination of the appeal.”

31. In Blacktown City Council v Macarthur Telecommunications Pty Ltd (admins apptd) [2003] NSWSC 883; (2004) 47 ACSR 391, Barrett J made an order that the administration of a company end forthwith. Barrett J referred to the decision of the High Court in Williams v Spautz and said that a consideration of purpose meant that it was appropriate to examine first the proper purposes of Part 5.3A of the Act. He referred to s 435A and said (at 396 [19]):

“But that is a broad statement only. Examination of Part 5.3A as a whole shows that there are several purposes which together contribute to the widely stated object. The provisions imposing the various moratoriums show that there is a purpose of allowing time for unpressured but reasonably prompt consideration of possible reconstruction possibilities. The provisions as to creditors meetings and creditor decision-making, including those concerning deeds of company arrangement, show that there is a purpose of allowing reconstruction possibilities to be pursued in such a way that, if creditors so desire, a legacy of debt may be left behind and winding up, which would normally be the product of an intolerable debt burden, may be avoided. Implicit in that, of course, is the proposition that the company will thereby be permitted to return to the mainstream of commercial life. Another purpose is that if the company is not capable of returning to the mainstream of commercial life, there will be some better outcome for creditors than that available in an immediate winding up. The importance of keeping that purpose in mind, in a case such as the present, was emphasised by Sundberg J in Dallinger v Halcha Holdings Pty Ltd (1995) 60 FCR 594; 134 ALR 178; 18 ACSR 835.”

32. Barrett J’s reasons for making the order he did in that case are set out in the following passage (at 397 [21]):

“My assessment of matters is that the administration in general and the deed proposal in particular were engineered by Mr Cullen in a clear and deliberate, but not subtle, attempt to stave off the District Court hearing by bringing the statutory stay of proceedings under s 440D into play and to provide a legal framework into which he, his accountant and his solicitor would become the sole effective decision-makers in a process which, while ostensibly holding out some theoretical benefit of modest proportions to creditors, is really designed to forestall the obvious and inevitable fate of insolvent winding up, in which the conduct of Mr Cullen will come under scrutiny by reference to the insolvent trading provisions. There is, at best, mere lip service to the purposes of Part 5.3A, the overriding purpose and motivation being the avoidance technique to which I have referred. In particular, there is not and could not be any real purpose of rehabilitating the company as a commercial concern. Nor can improved returns to creditors through the proposed deed of company arrangement be regarded as anything but purely speculative.”

33. In St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd (admins apptd) [2004] NSWSC 851; (2004) 50 ACSR 443, Barrett J made an order bringing the administration of a company to an end. The improper purpose of the director and appointor in that case was to manipulate the “relation-back day” to his benefit. I should say at this point that counsel for Mr Foti did not seek to argue that Mr Salisbury’s purpose was one involving the manipulation of the relation-back day.
34. Mr Foti claims that Mr Salisbury had two improper purposes in appointing the administrators. As I have said, he acknowledges that, if one is made out, it must be the predominant purpose, and, if both are made out, then they must be the predominant purposes.
35. First, it is alleged by Mr Foti that Mr Salisbury’s purpose in appointing the administrators was to gain control of the company. He submitted that Mr Salisbury seeks to gain control by the share issue which forms part of Mr Salisbury’s proposal for a deed of company arrangement. He pointed to the fact that if the share issue proceeds, Mr Salisbury will hold 242,002 of the 242,004 shares forming the issued share capital of the company. I asked counsel for Mr Foti to identify the benefit which would enure to Mr Salisbury if he put himself in this position. He said that Mr Salisbury would then be in a position to take the lion’s share of any residual equity in the two apartments.
36. It seems to me that this is a case in which there is no one circumstance which points to a proper or improper purpose. All the circumstances of the case must be considered. I have considered all of the circumstances and I do not think they support a conclusion that Mr Salisbury’s purpose in appointing the administrators was to gain control of the company. There is evidence before me that Mr Salisbury considered that the two apartments would not realise anywhere near their true value if they are sold by a liquidator or secured creditor. Experience suggests that there is a reasonable basis for that belief. To purchase the secured debt and to place the company in administration was one way of avoiding that result. Mr Salisbury’s proposal for a deed of company arrangement involves him providing funds to the company which would see a return to creditors. Although the proposed return is modest, it has the advantage of being certain in terms of amount and time of payment. As far as the share issue is concerned, it does not seem to me to be at all surprising that Mr Salisbury would insist on some consideration for the money he proposes to advance. On the evidence before me, a share in the company would not be worth the one dollar he proposes to subscribe and, in fact, the shares may prove to be utterly worthless. Furthermore, on the evidence before me, it is highly speculative to say that there will be net equity in the two apartments available to shareholders. At the moment, there are appraisals which are not formal valuations and which were conducted on a “sight unseen” basis and there is uncertainty as to whether Built Environs will establish its claim. In all these circumstances, it seems to me that the evidence does not support a conclusion that Mr Salisbury’s purpose, let alone his predominant purpose, in appointing the administrators was to gain control of the company through the issue of shares.
37. Secondly, it is alleged by Mr Foti that Mr Salisbury’s purpose in appointing the administrators was to avoid investigations and possible actions by a liquidator in relation to transactions in which he was involved and, in particular, the transaction involving the King William Street property and the transaction involving the Wallaroo land. As I have said, the report of the administrators suggests that there are transactions involving Mr Foti’s interests and transactions involving Mr Salisbury’s interests which call for further investigation. The possibility of claims by a liquidator against Mr Salisbury calls for careful consideration of his purpose in appointing the administrators.
38. There is no doubt that Mr Salisbury’s action in paying out the substantial debt owed to the Bank was a significant step and it was followed by the appointment of the administrators. Mr Foti points to Mr Salisbury’s secret negotiations with the bank and the fact that the mediation was occurring at about the same time and submitted that I should draw an inference adverse to Mr Salisbury from these facts. It is not clear to me what precise inference Mr Foti is asking me to draw and without more I am not prepared to draw any inference from these facts. It may be that Mr Salisbury simply decided to keep his options open in case (as happened) the mediation failed. Of course, I do not know what happened at the mediation.
39. Mr Foti also points to the fact that the creditors may receive a greater return on a liquidation than they may receive under Mr Salisbury’s proposal. He points to the administrator’s report in this respect. There are two answers to this submission. First, the administrators’ views are provisional and are based on information not necessarily available to Mr Salisbury at the time he exercised the power of appointment. Secondly, and this is perhaps related to the first point, Mr Salisbury’s proposal (if it proceeds) has the advantage to creditors of certainty as to payment and amount.
40. Mr Salisbury’s purpose is to be determined according to all the circumstances. There is evidence that he wished to provide a return to creditors and to secure an orderly sale of the company’s remaining assets, namely, the two apartments. Even if it is proper to infer that he was aware of the possibility of claims being made against him should the company be placed in liquidation, I do not think the evidence supports a conclusion that his purpose in appointing the administrators was to avoid claims against him by a liquidator. Certainly, the evidence does not rise to the level of supporting a conclusion that, if that was his purpose, it was his predominant purpose.

Conclusion

41. It was for these reasons that I made an order that the application of the plaintiff that the administration of P & S Investments Pty Ltd be brought to an end be refused.
    

I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Associate:

Dated: 26 November 2009

Counsel for the Plaintiff:	Mr G Dart
Solicitor for the Plaintiff:	Griffin Hilditch
Counsel for the Defendant:	Mr J Madsen
Solicitor for the Defendant:	Madsen Rowley
Counsel for Opposing Contributory:	Mr B Roberts
Solicitor for Opposing Contributory:	Finlaysons

Date of Hearing:	20 November 2009
Date of Judgment:	2 December 2009