CEO MINISTRY OF FISHERIES V E & B MANAGEMENT LTD(ADMINISTRATOR APPOINTED) HC AK CIV-2011-404-001302

CEO MINISTRY OF FISHERIES V E & B MANAGEMENT LTD(ADMINISTRATOR APPOINTED) HC AK CIV-2011-404-001302 1 April 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2011-404-001302BETWEEN THE CHIEF EXECUTIVE OF THEMINISTRY OF FISHERIESPlaintiffAND E & B MANAGEMENT LIMITED(ADMINISTRATOR APPOINTED)DefendantHearing: 23 March 2011Appearances: S K Barr for the PlaintiffP J Morris for the DefendantJudgment: 1 April 2011RESERVED JUDGMENT OF PRIESTLEY JThis judgment was delivered by me on Friday 1 April 2011 at 4 pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:.Counsel/Solicitors:S K Barr, Luke Cunningham & Clere, DX SP23529, Wellington 6143. Fax: 04 471 2065.Email: skb@lcc.co.nzP J Morris, Stace Hammond, DX GP20026, Hamilton 3244. Fax: 07 838 2052.Email: PhilipM@shg.co.nzINDEXParagraphThe parties and associated people 1Application to appoint interim liquidator 5Previous orders 11Why does the plaintiff want an interim liquidator appointed? 12What does Mr Coleman say and what has he been doing? 22Is the plaintiff using its Fisheries Act powers for animpermissible purpose? 37Discussion 46Conclusion 62Result 71Costs 79The parties and associated people[1] The plaintiff is effectively responsible (in an administrative rather than a constitutional sense) for the operation of the Ministry of Fisheries. The Ministry has extensive powers and responsibilities under the Fisheries Act 1996 ("Fisheries Act")which include the management and preservation of New Zealand's fishing resource.[2] The defendant is a limited liability company. Its business is fishing. For that purpose it owns or owned substantial quantities of Annual Catch Entitlement (ACE) issued under the Fisheries Act. The defendant's sole director is a Mr Brian Deadman who also owns 50% of its shares. The other 50% shareholder is a Ms Chernova.[3] In addition to its ACE the defendant owns a substantial asset, being a fishing trawler, Pacific Explorer. That vessel was seized by the plaintiff along with a 30 tonne catch, when it put into Napier on 1 February 2011. The ground for seizure wasthat the vessel was operating illegally because the defendant's fishing permit hadbeen suspended. The vessel is subject to the release procedures contained in s 210 of the Fisheries Act.[4] With effect from 1 February 2011 the defendant has been in voluntary administration. The administrator appointed under Part 15A of the Companies Act 1993 (the Act) is an accountant, Mr P M E Coleman. Under Mr Coleman'sadministration the defendant continued to fish under the authority of a fishing permit owned by Mr Simon Rushbridge. In due course the plaintiff suspended MrRushbridge's fishing permit. The day after the hearing in this Court a reserved judgment of Judge S E Thomas, delivered in the Wellington District Court, removedthe suspension of Mr Rushbridge's fishing permit pending final determination of hisapplication. The position of Mr Rushbridge and his permit is, in my view, of minimal relevance.Application to appoint interim liquidator[5] Unfortunately the plaintiff has lost any confidence it had in Mr Coleman'sadministration. On 8 March 2011 it applied, without notice, for an order to appoint interim liquidators of the defendant. It filed contemporaneously a supporting affidavit from the Ministry of Fisheries chief legal advisor, Mr S H Gallacher, together with a substantive statement of claim. There were absolutely no apparent grounds for moving without notice. Associate Judge Bell directed that the defendant's administrator was to be served and listed the plaintiff's application for amentions hearing.[6] Somewhat belatedly, on 17 March, the plaintiff filed an application seeking leave to bring its proceeding. Section 239ABE of the Act requires leave to bring proceedings against companies in voluntary administration.[7] The power of this court to appoint an interim liquidator is found in s 246 which relevantly provides:246 Interim liquidator(1) If an application has been made to the Court for an order that a company be put into liquidation, the Court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.(2) Subject to subsection (3) of this section, an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.(3) The Court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.(4) The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made.Thus the grounds on which this Court can appoint an interim liquidator are that it is necessary and expedient. The onus clearly rests on the plaintiff in that regard.[8] The plaintiff's substantive claim, contained in its statement of claim, is to place the defendant into liquidation. The plaintiff relies on its status as a creditor under s 241(2)(c)(iv) of the Act and alleges, in terms of s 241(4), that the administrator has caused the company to frustrate the objects of Parts 15A and 16 of the Act and has failed generally to comply with the provisions of Part 15A.[9] The proposed liquidators, who have filed the necessary consent and certification, are Wellington insolvency practitioners, Iain Bruce Shephard and Christine Margaret Dunphy of the Wellington firm Shepherd Dunphy. No issue is taken with their suitability.[10] The plaintiff's application is supported by Aimex Limited, a Nelson based company, which is currently owed $73,000 for work carried out on the defendant'svessels.Previous orders[11] In addition to the order to which I have referred, directing service on the administrator, Associate Judge Bell made an order on 10 March preventing thecompany and its administrator from disposing of any of the defendant's assets untilfurther order. The Judge clarified that order on 18 March, making it clear that while Mr Coleman was authorised to pay ordinary day to day administration costs and legal fees, the assets to which the interim order extended included this ACE and the vessel.Why does the plaintiff want an interim liquidator appointed?[12] The plaintiff has a number of concerns which are set out in Mr Gallacher'ssupporting affidavit and in an affidavit of a Ministry solicitor, Mr S S Eccles, who attended a creditors' meeting organised by Mr Coleman on 11 February.[13] On 21 January 2011 the plaintiff suspended the defendant's fishing permitbecause, at that stage, the defendant's Deemed Value liability exceeded $1,000. Under s 79(1) of the Fisheries Act the permit of a commercial fisher is treated asbeing suspended if Deemed Values in excess of $1,000 remain unpaid. I need not discuss in this judgment the concept of Deemed Value. Suffice to say that the provisions relating to Deemed Value contained in ss75-79B of the Fisheries Act are designed to impose significant penalties, depending on the species involved, on fishers who exceed on a six monthly and 12 monthly basis the tonnage authorised by ACE. The Deemed Value liability in essence is designed to penalise over-fishing. ACE tonnage can be exceeded sometimes deliberately but, more often, accidentally because fishing nets do not discriminate amongst the species they scoop up. A Deemed Value liability can be satisfied, either by paying the sum involved, or alternatively by purchasing ACE to match the exceeded tonnage.[14] The defendant's permit having been suspended because its outstanding Deemed Value liability exceeded $1,000, the next calamity to befall the defendant was the seizure of its vessel (supra [3]) on 1 February. The basis for the seizure was illegal fishing because the defendant had allegedly continued to fish whilst its permithad been suspended by using Mr Rushbridge's permit.[15] Early acts of Mr Coleman as administrator included transferring the defendants ACE to others. A substantial quantity of ACE was transferred to Mr Rushbridge on 4 February. The effect of this transfer, as the plaintiff advised MrColeman on 10 February, was to increase the level of the defendant's indebtedness tothe Ministry to just under $190,000. By transferring ACE out of the company the defendant no longer held sufficient ACE to cover catches during the relevant period. Thus its Deemed Value liability increased. The only way to avoid liability, as I have said, would be to purchase new ACE, which the parlous financial state of the defendant hardly permitted it to do.[16] The plaintiff, being concerned by the defendant's increased Deemed Valueliability, raised these concerns with Mr Coleman. On 25 February the plaintiffplaced a new condition on the defendant's fishing permit under s 92(2) of theFisheries Act to the effect that, whilst the defendant's permit remained suspended itwas prohibited from transferring ACE if such transfers had the effect of increasingthe amount of the defendant's interim or annual Deemed Value.[17] Mr Gallacher deposes that the plaintiff advised Mr Coleman of that new imposed condition by email at 2.15 pm on 25 February. In less than an hour, more ACE was transferred by the defendant to Taudre Fisheries Limited. The sole director of Taudre is Mr Deadman. The effect of those transfers was to increase thedefendant's Deemed Value liability from just under $190,000 to $359,617. Later that afternoon all the ACE the defendant had transferred to Taudre was transferred by Taudre to Kiwi Fishing Limited, a company of which Mr Coleman is the sole director and of whose shareholder he is the sole director.[18] Mr Gallacher deposes to concerns the plaintiff has over Mr Deadman. Previous entities in which he has been involved have been liquidated, resulting in the plaintiff having to write off significant debt owed to it by way of Deemed Value liability. One such entity, Nikau Enterprises Limited owed the Crown $651,000. Apersonal debt of Mr Deadman's for $124,500 had previously been written off.[19] Mr Gallacher's deposed concerns included that Mr Coleman and Mr Deadman were engaged "in a course of conduct designed to deliberately frustrate the purposes of both the Fisheries Act 1996 and the Companies Act 1993".[20] Mr Eccles' concerns relate to the 11 February meeting of creditors heattended on the plaintiff's behalf. Only two creditors (including Mr Eccles) were present. A third creditor having arrived left, so Mr Eccles deposes, before any voting took place. Mr Eccles states that Mr Coleman addressed the quorum issue by saying a quorum was not needed. No interest statement was tabled by Mr Coleman. Nodirector's statement was tabled. Mr Coleman was somewhat equivocal whenquestioned about the transfer of ACE. Mr Coleman was reported as confirming that"although the defendant was technically insolvent it wanted to continue to trade, itwas not a cot case". He had been trying to sell key assets.[21] Mr Coleman and Mr Eccles part company on the issue of whether the firstcreditors' meeting was quorate. Clause 4(1) of Schedule 5 of the Act demands a quorum of three creditors. Mr Coleman's affidavit exhibits a copy of the minutes ofthat meeting. There was "proxy attendance" by the two shareholders, Mr Deadmanand Ms Chernova, and by an entity called Chin-Kiwi Limited. In addition to MrColeman there were only three creditors' representatives in attendance, one ofwhom, Mr Neil, on behalf of Allied Nationwide Finance, is recorded as departing 25 minutes after the start of the meeting. Mr Eccles, for his part, is recorded as havingmoved the confirmation of Mr Coleman's appointment as administrator andseconding a resolution to defer a decision on appointing a creditors' committee untilthe watershed meeting. Whether those resolutions were passed before or after MrNeil's departure is unclear.What does Mr Coleman say and what has he been doing?[22] Mr Coleman's most significant assertion is that Kiwi Fishing Company, a company he owns, is in effect holding all the ACE transferred to it for the defendant as beneficiary. Assuming that this is the case and the distinction between legal and beneficial ownership is not a fatal impediment to holding the defendant's DeemedValue liability, then Mr Gallacher's concerns may fall away. As Mr Coleman explained it, not transferring ACE out of the defendant's "FishServe" account before the attachment of the special condition to the defendant's fishing permit (supra [16]) might have the effect of providing an impermissible preference to the plaintiff as opposed to other creditors. I am not convinced by this explanation.[23] Mr Coleman deposed that the Deemed Value debt of the defendant at the end of the 2010 calendar year was $241,065. That is high and is of significant alarm. However, he states that by 1 February 2011, the date when his appointment as administrator began, the debt had reduced to $59,319. That of course is still significantly above the s 79(1) Fisheries Act $1,000 figure. But three further successful fishing trips by the Pacific Explorer would clear the debt owed by the defendant. However, unless the plaintiff was prepared to release the seized vessel, the only practical way for the defendant to continue to trade to pay off creditors would be by demise charter. Mr Coleman's intention was to enter into a demise charter with Pacific Explorer Fishing Limited.[24] Executed demise charter agreements, fishing on behalf agreements, and fishsale agreements were annexed to Mr Coleman's affidavit. The other party to thesearrangements, Pacific Explorer Fishing Limited was described as "Brian Deadman's new company". The other significant party was Mr Rushbridge.[25] Mr Coleman deposed, there being no basis to find to the contrary, that when Mr Deadman first approached him for advice on restructuring his business in late December 2010, there had been no professional or other involvement between the two for 15 years.[26] Mr Coleman disputes that he has failed to comply with Part 15A of the Act. He accepts that he has not convened a watershed meeting as contemplated by s 239AT. However, both he and his counsel sought orally for an extension by this Court of the convening period for watershed meeting under s 239AT(3). The subs 2convening period is 20 days after the administrator's appointment.[27] Mr Coleman's overall assessment of the defendant's position is one ofcautious optimism. He says the company has two commercial fishing vessels of which only the Pacific Explorer is operating. That vessel is well equipped and maintained. The company is a preferred fresh fish supplier of Progressive Enterprises Limited. Mr Coleman asserts the defendant has a viable balance sheetand has "a quantity of surplus assets that can be realised in an orderly business restructuring". He asserts the defendant has been prudently managed by Mr Deadman. The defendant currently has "no secured direct bank debt" and can befinancially restructured "so as to achieve a more viable equilibrium between short and long term liabilities and an enhanced working capital ratio that will ensure its sustainable future existence".[28] Exactly what all that means is unclear to me. Nowhere does Mr Coleman present to the Court a statement of the defendant's current assets and liabilities.What was asserted from the Bar, however, was the defendant currently has some 75 creditors with a total indebtedness of approximately $850,000 of which the plaintiff ($359,000) is the largest unsecured creditor. Another substantial creditor is Pacific Trawling Limited, which counsel state is owed approximately $220,000. Presumably that figure relates to the unpaid purchase price on the defendant's vesselPacific Explorer.[29] Part 15A of the Act, which is relatively new legislation, states that the Part'sobject (s 239A) is to provide for the business and affairs of an insolvent company to be administered in such way as:(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 shareholders than would result from an immediate liquidation of the company.[30] The various subparts which follow relate to the appointment and investigation powers of an administrator. Section 239AN obliges an administrator tocall a first creditors' meeting within eight days to decide whether to appoint a creditors' committee and whether to replace the administrator. It seems that the 11February meeting to which both Messrs Eccle and Coleman refer was such a meeting.[31] A critical part, however, of the Part 15A process is the watershed meeting. As s 239AS clearly states, the watershed meeting is the creditors' opportunity todecide on a company's future and in particular whether a deed of companyarrangement should be executed. Section 239AV stipulates a watershed meeting must be held within five days after the end of the s 239AT(2) 20 day convening period.[32] No such watershed meeting has been held. I note Mr Coleman's statementthat he was in a position to send out notices of a watershed meeting on Monday 28 March.[33] It is clear, both from Mr Coleman's affidavit and also the submissions made on his behalf by Mr Morris, that Mr Coleman is offended by the attack on his integrity made by Mr Gallacher. For my part, I record that I see no basis for a claim that Mr Coleman has deliberately embarked on a course of action designed to defeat the plaintiff's legitimate interests or circumvent the provisions of the Fisheries Act.[34] That said, it is clear that Mr Coleman has failed to meet various Part 15A timelines and obligations. In that regard an affidavit filed by a partner of the chartered accounting firm of Deloitte in Wellington, Mr D S Vance, is instructive. Mr Vance has had considerable experience with company insolvencies and restructuring.[35] Mr Vance, helpfully, summarises the various temporal obligations set out in Part 15A so far as an administrator is concerned. These are:Day 3 Notice of appointment advertised and sent to creditors.Day 8 First meeting of creditors.Day 10 Secured creditor decision period ends.Days 0-20 Investigation into company's affairs and preparation ofrestructuring plans.Day 20 Administrator sends proposed restructuring report and notice of meeting to creditors.Day 25 Watershed meeting.[36] Mr Vance makes the following observations about Mr Coleman'sadministration:(a) No notice of advice of appointment or notice of the first creditors'meeting appears to have been received by the plaintiff.(b) A formal notice of the 11 February meeting does not seem to have been dispatched.(c) The plaintiff was only advised of the creditors' meeting after a number of requests and then only by email.(d) Aimex Limited (a creditor to the tune of $73,000 (supra [10]) received no notice of the meeting.(e) There was no apparent notice of appointment nor advice of the meeting. Mr Coleman did, however, publicly advertise the meeting date in the Bay of Plenty Times on 5 February 2011.(f) A Debtorlink notice (a service which provides to subscribers a search for classified advertising relating to insolvency appointments) was not received by Deloitte until 15 February 2011.(g) The watershed meeting should have been convened by 1 March 2011 and held by 8 March. It has been neither convened nor held.(h) No application has been made to extend the convening period.(i) No restructuring plan or relevant information on the financial position of the defendant has been provided to creditors.(j) A search of the company's office reveals that Mr Deadman isrecorded as being either a shareholder or director in 17 companies, 69% of which have either failed or been struck off.(k) Some of the administrator's transactions arguably protect the interests of Mr Rushbridge, whereas Mr Coleman's principal duty is to protectthe interests of the defendant's creditors.Is the plaintiff using its Fisheries Act powers for an impermissible purpose?[37] There were suggestions contained in Mr Coleman's affidavit, and alsopossible themes in Mr Morris's submissions to the effect that the plaintiff was using its powers under the Fisheries Act for the ulterior purpose of protecting its position as an unsecured creditor in respect of the defendant's Deemed Value liabilities. Certainly the plaintiff has acted robustly. I note it engaged senior counsel for theDistrict Court proceeding involving Mr Rushbridge's permit suspension. (supra [4]). Initially senior counsel was retained for this proceeding. However, a party's choice of counsel establishes nothing.[38] The cumulative effect of the plaintiff's actions, by suspending thedefendant's fishing permit on 21 January, seizing the Pacific Explorer, attaching a condition to the defendant's ACE, declining (to date) to release the Pacific Exploreron a bond, and by now seeking to replace Mr Coleman as administrator with interim liquidators of its choice, are all indicative of a sustained campaign.[39] But a sustained campaign to what end? What clearly has triggered the plaintiffs' concern and led to the defendant's predicament was the situation the plaintiff faced on 31 December 2010 which was, on Mr Coleman's own evidence, unpaid Deemed Value of $241,000. The s 79 Fisheries Act $1,000 limit has been set by Parliament. The entire Deemed Value concept is designed to prevent overfishing by ACE holders and is consistent with the s 8 Fisheries Act purpose of ensuring sustainability.[40] Doubtless, having lost irretrievably considerable sums in the past as a resultof Mr Deadman's activities, the plaintiff is strongly motivated not to be caught yet again. Its apprehension in that regard would not have been allayed by the rapid transfer of the defendant's ACE on the same day that a condition preventing transfer was attached pursuant to statutory authority to the defendant's fishing permit. There is no evidence which suggests any sensible or frank communication between Mr Coleman and the plaintiff about his plans and objectives. That communication failure would have heightened suspicions and reinforced the plaintiff's fears.[41] The only possible criticism I am prepared to make of the plaintiff is that, when the Pacific Trader was seized in Napier on 1 February, its 30 tonne catch was seized and sold by the Ministry for $57,113 plus GST. There can be no question that the plaintiff had power under s 207 of the Fisheries Act to seize the catch. Yet Mr Coleman deposes that the defendant already had confirmed sales orders for the landed fish totalling $110,856 plus GST. If the plaintiff in fact knew about those confirmed sales orders and ignored them in favour of exercising its own statutorypowers then, in my judgment, such an action was high-handed and has served only to weaken somewhat the position of the defendant's creditors of which the plaintiff is but one.[42] What is unclear is whether the plaintiff had any knowledge on 1 February 2011 that there were confirmed sales orders in respect of the 30 tonne catch or whether Mr Coleman (although he was only appointed an administrator that day) took any steps to alert the plaintiff about those orders. I am aware that, as a practicality, landed fish, albeit refrigerated, should be sold and dispatched rapidly.[43] I thus direct that Mr Gallacher and Mr Coleman, within four working days of this judgment being delivered, are to swear, file, and serve short affidavits deposing:(a) On Mr Coleman's part whether, as administrator, and if so, when and how, he informed the plaintiff of the sales orders to which he refers.(b) On Mr Gallacher's part the date on which the 30 tonne cargo wassold, whether the plaintiff had any knowledge that the catch was subject to sales orders, and if so when that knowledge was received and why the plaintiff preferred to exercise its statutory power.[44] Such information may assist the interim liquidator I intend to appoint.[45] In the absence of any cogent evidence I see no basis to conclude that the plaintiff has at any stage, despite its robust stance, abused its powers under the Fisheries Act or used them for the ulterior purpose of shoring up its position as an unsecured creditor. But doubtless that is an issue the interim liquidator or creditors may wish to explore.Discussion[46] Much of counsel's helpful submissions focused on the interesting jurisdictional point arising out of the interrelationship between s 239E(2)(b) and s 239AT(3) and (4).[47] Section 239E(2)(b) provides:2(b) if the convening period expires without the watershed meeting having been convened or without an application having been made to extend the convening period, the administration ends at the end of that period;[48] Thus, if the 20 day convening period expires without the watershed meeting having been convened, or without an application having been made to extend the 20 day period, then the administration ends. The 20 day convening period, defined in s 239AT(2) as 20 working days, (in this case from 1 February) has expired. Until the hearing by way of oral application, no application had been made by Mr Coleman to extend it.[49] Section 239AT(3), however, empowers the Court to extend the convening period. Such application can be made before or after the expiration of the convening period (subs 4). The point on which counsel focused was whether, the administration having ended by virtue of the former provision, it can be revived by an application made after the expiration of the convening period. Certainly s 239AT(4) specifically contemplates such an application being made. The power to extend relates to the administrator's s239AT(1) statutory obligation to convene the critical watershed meeting within the 20 working day period. It does not specifically relate to the administration period itself.[50] There is no direct New Zealand authority on the issue of the consequences to an administration of a failure to apply for an extension of the convening period before the 20 working day expiration. Heath J did not address this issue in Nylex (New Zealand) Limited (Administrators Appointed and in Receivership).1 His Honour rejected a submission that orders extending the convening period could onlybe made before that period's conclusion. In that case the application had been made while the convening period was still running. Heath J relied in particular on s 239E(2)(c), to the effect that when an application has been made to extend a convening period which expires after the application was made, then the administration ends when the application is refused or otherwise disposed of without an extension being granted.1 Nylex (New Zealand) Limited (Administrators Appointed and in Receivership) HC AK CIV-2009-404-1217, 11 March 2009.[51] Similar provisions contained in Australia's Corporations Act have been reconciled by holding that a court can exercise its discretion to allow an extension of time retrospectively, even though the administration comes to an end at the expiration of the convening period (LMP Developments Pty Ltd v ZLM Property Holdings Pty Ltd)2.[52] That approach makes both interpretive and commercial sense and, had I needed to decide whether I had power retrospectively to reinstate the convening period, and thus the administration, I would probably have followed the Australian approach.[53] This observation, however, is obiter and will need to be re-examined in some future case where the issue is critical. I do not, in this case, intend to extend the convening period.[54] I consider Mr Barr is on strong ground when he submits first that the administration period is prima facie at an end by virtue of s 239E(2)(b) because no watershed meeting has been convened. Secondly no formal application has been made for an extension of the convening period. Thirdly there is no evidence which points to any compelling basis for Mr Coleman's failure to convene a watershed meeting within the statutory time frame.[55] Were I in a position to accede to Mr Morris's submissions that the convening period should be extended and Mr Coleman, in effect, remain at his post as administrator, my approach would have been different. However, that is not the conclusion I have reached.[56] Mr Morris pointed to s 239ABW which provides:239ABW Court must not appoint interim liquidator if administration in creditors' interestsThe Court must not appoint an interim liquidator of a company in administration if the Court is satisfied that it is in the interests of the company's creditors for the company to continue in administration rather than have an interim liquidator appointed.2 LMP Developments Pty Ltd v ZLM Property Holdings Pty Ltd [2008] FCA 1109.Leaving aside the point of whether the defendant continues in administration, Mr Morris accepted the onus was on the defendant to satisfy the Court that the defendant should not be placed into liquidation.[57] Mr Morris's careful submissions pointed to the underlying policy of Part 15A to which I have referred (supra [29]) and also to a number of Australian decisions decided under comparable legislation. Cases such as Emanuel Exports Pty Limited v United Farmers International,3 Deputy Commissioner of Taxation, Re Managenet Pty Limited v Managenet Pty Limited,4 Lubavitch Mazal v Yeshiva Properties (No 1) & Others,5 and TCS Management Pty Limited v CTTI Solutions Pty Limited,6 are all cases where, in general terms, Australian Courts have stressed the importance ofprioritising creditors' interests and in particular the importance of creditors themselves being able to assess the various advantages which might flow from adopting deeds of company arrangement proposed by administrators.[58] In general terms Part 15A tilts towards empowering creditors. Certainly creditors should be given opportunities to consider proposals and deeds of company arrangements which point to ongoing administration designed to improve acompany's overall financial position.[59] In this case, although Mr Coleman has a plan based on a demise charter (supra [23]), it has not been formulated in a timely fashion. Nor, as far as I can see, have any timelines or projected figures been produced which might lead the creditors, whose interest currently totals $850,000, quite apart from any secured creditors there may be, to conclude that it was in their interests to allow the company to continue under administration.[60] Finally Mr Morris pointed to what he submitted were benefits which would flow from continuing administration. These included the option of settling Deemed Value debt by transfer of ACE up to 15 October 2011 (the end of the Deemed Value annual period). Mr Coleman's perception was the cost of settling Deemed Value3 Emanuel Exports Pty Ltd v United Farmers International [1998] FCA 1090.4 Deputy Commissioner of Taxation, Re Managenet Pty Ltd v Managenet Pty Ltd [2005] FCA 1903.5 Lubavitch Mazal v Yeshiva Properties (No 1) & Others [2003] NSWSC 535.6 TCS Management Pty Ltd v CTTI Solutions Pty Limited [2001] NSWSC 830.debt through the acquisition of ACE was substantially less than the current dollar value of that debt. Demise charter to another of Mr Deadman's companies, coupledwith the ability to fish under Mr Rushbridge's permit and a resultant joint venture, would secure cash flow for the company from the charter fee. Immediate liquidation would prevent such an outcome.[61] Mr Morris submitted strongly that the defendant's creditors should at least begiven the opportunity to consider Mr Coleman's proposal at a watershed meeting. But without adequate explanation, an objective perception of Mr Coleman'sactivities and his proposal for the defendant to continue fishing in conjunction with Mr Deadman, could lead to a conclusion that they undermined the management systems the Fisheries Act puts in place.Conclusion[62] The breakdown of trust between the plaintiff and Mr Coleman is critical. The process and procedures envisaged by Part 15A are not assisted when the major creditor no longer trusts the administrator. I do not intend to apportion blame for causing the breakdown. Suffice to say it has occurred.[63] In that regard Mr Coleman's failure to observe, for whatever reason, the timeline of the convening period and his failure to hold or convene the watershed meeting (or indeed to apply inside the convening period for an extension) have not assisted.[64] The breakdown of trust is particularly critical because the plaintiff is not just a major creditor. It is also a statutory entity with which the defendant must work if it is to have any hope of securing the release of the Pacific Explorer, negotiating the release of the restrictive condition attaching to its ACE, and continuing to fish legally. The administrator cannot possibly hope to negotiate on the company'sbehalf to creditors' advantage when the plaintiff no longer trusts him or indeed is suspicious about the arrangements he hopes to put in place.[65] The defendant's financial position may well be precarious. Unfortunately the actions taken by Mr Coleman since 1 February 2011 have arguably made the defendant's position worse. Certainly this is the case if, despite Kiwi FishingLimited holding its ACE for the defendant's benefit (Mr Coleman's assertion), itdoes not avail to reduce significantly the increased Deemed Value liability which has built up during the period of Mr Coleman's administration.[66] I consider the interests of all creditors need objective evaluation and investigation of the defendant's situation. It is too late now for that assessment to be carried out by Mr Coleman within the timelines and in the manner contemplated by Part 15A. It can only, in my view, be ascertained by an independent liquidator.[67] I therefore intend to grant the plaintiff's application and appoint an interim liquidator pursuant to this Court's power under s 246(1). I am satisfied that such an order is both necessary and expedient for the purpose of maintaining the value of the assets which the defendant owns and manages. Particularly is this the case in respect of the defendant's apparent asset, the Pacific Explorer, and its transferred and remaining (if any) ACE.[68] Whether or not the defendant should continue to trade, or whether instead it should be placed into liquidation, is a matter which will need to be assessed by this Court at a later stage on the basis of the liquidator's report.[69] Section 246(3) empowers this Court to limit the rights and powers of an interim liquidator. I intend to constrain the liquidator to some extent. The regime I intend to impose is to require the appointed interim liquidator to report back to Associate Judge Bell within 20 working days. That report will doubtless be considered by the Associate Judge in tandem with the next call of the plaintiff'ssubstantive application to appoint a liquidator, a date for which I shall fix on the farside of the liquidator's report.[70] There is a direction, if such a direction is required, that Mr Coleman is to co- operate with the appointed liquidator to the extent of providing him/her with all records and information acquired by him during the period of his administration,which must inevitably include information relating to ACE currently held and acquired by Kiwi Fishing Limited, and also relating to Mr Coleman's embryonicdemise charter plans.Result[71] Leave is granted to the plaintiff to bring its application.[72] There is an order appointing Mr I V Shephard and/or Ms C M Dunphy as interim liquidator of E & B Management Limited pursuant to s 246(1) of the Companies Act 1993.[73] Until further order of the Court the liquidator may exercise the powers conferred by Schedule 6 of the Companies Act 1993 but not, without leave, those powers contained in (a) and (c) of Schedule 6 and not in any event, until later reviewed by Associate Judge Bell, those powers contained in (d) (full payment to creditors) and (k) (borrowing money on security) of Schedule 6. Any power under (e) (compromise arrangement with creditors) is to be limited solely for the purposeof securing the release for the defendant's benefit of the vessel Pacific Explorer.[74] The liquidator is directed to prioritise his/her power to call a meeting of creditors.[75] Within 20 working days of the release of this judgment the liquidator is directed to prepare for this Court, marked for the attention of Associate Judge Bell, a report which inter alia should include:(a) A preliminary statement of the defendant's assets and liabilities.(b) Ownership of all ACE owned by the defendant before 1 February 2011, and whether such ACE is held beneficially for the defendant.(c) Details and discussion of the defendant's liability to the plaintiff forDeemed Value debt.(d) The views of creditors on whether the company should continue to trade or be placed into liquidation.(e) The efficacy of the defendant continuing to trade, with or without restriction, or by way of demise charger.(f) The ability of the company to pay its Deemed Value debt and/or acquire more ACE to extinguish such debt.(g) Whether the liquidator recommends and/or sees any useful purpose in appointing an administrator for a period pursuant to the provisions of s 239J of the Companies Act 1993.(h) Any other matters which the liquidator deems relevant or of assistance to the Court.[76] Leave is reserved to the liquidator to apply for further directions or orders if the need arises.[77] The plaintiff's substantive application for liquidating the company is to beplaced into Associate Judge Bell's companies' list, for review and further orders if needed, on 11 May 2011.[78] The interim liquidation commences at the time and date of the issue of this judgment, being 4 pm on 1 April 2011.Costs[79] Costs, if they are to be an issue, are reserved and are to be determined at an appropriate stage by an Associate Judge........................................Priestley J