Ball v Jeremy Joseph Nipps as liquidator of Ochre Group Holdings Ltd (in Liquidation) - [2023] WASC 348

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   BALL -v- JEREMY JOSEPH NIPPS as liquidator of OCHRE GROUP HOLDINGS LTD (IN LIQUIDATION) [2023] WASC 348
CORAM:   STRK J
HEARD:   15 AUGUST 2023 & 11 SEPTEMBER 2023
DELIVERED          :   11 SEPTEMBER 2023
FILE NO/S:   COR 49 of 2023
BETWEEN:   SAXON TRAVIS BALL
First Plaintiff
MICHAEL RUSSELL DELIU
Second Plaintiff
MADE SUMARYA
Third Plaintiff
AND
JEREMY JOSEPH NIPPS as liquidator of OCHRE GROUP HOLDINGS LTD (IN LIQUIDATION)
Defendant

Catchwords:

Corporations Law - Appeal against liquidator's rejection of plaintiffs' proofs of debt - Application pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations) that the liquidator be directed to call a meeting of creditors for the purpose of resolving that the liquidator be removed - Failure by third plaintiff to attend the hearing of the application - Power to proceed in the absence of the third plaintiff - Consideration of use in the alternative of the springing order power pursuant to the Rules of the Supreme Court 1971 (WA) O 4A r 23 and the Inactive Cases List - Consideration of merits and disposition in the absence of the third plaintiff - Costs

Legislation:

Corporations Act 2001 (Cth)
Corporations Regulations 2001 (Cth)
Insolvency Practice Rules (Corporations) 2016 (Cth)
Rules of the Supreme Court 1971 (WA)
Supreme Court (Corporations) WA Rules 2004 (WA)

Result:

Plaintiffs' applications dismissed

Category: B

Representation:

Counsel:

First Plaintiff	:	Timothy Kennedy
Second Plaintiff	:	Timothy Kennedy
Third Plaintiff	:	No appearance
Defendant	:	Rachael Young SC

Solicitors:

First Plaintiff	:	Kennedy Vinciullo
Second Plaintiff	:	Kennedy Vinciullo
Third Plaintiff	:	No appearance
Defendant	:	Mills Oakley

Case(s) referred to in decision(s):

5G Developments Pty Ltd (formerly known as Denham Wyndham Pty Ltd) (in liq) v Massie [2021] FCA 791
Brodyn Pty Ltd t/as Time Cost and Quality v Dasein Constructions Pty Ltd [2004] NSWSC 1230; (2005) 21 BCL 443
Keyside Investments WA Pty Ltd v Quartz Water (Leonora) Pty Ltd [2001] WASCA 156
McMillan Investment Holdings Pty Ltd v Morgan [2023] FCAFC 9; (2023) 295 FCR 543
O'Brien v Tanning Research Laboratories Inc (1988) 7 ACLC 182; (1988) 84 ALR 221
Promoseven Pty Ltd v Markey; Bluechip Development Corp (Cairns) Pty Ltd (in liq) (recs and mgrs apptd) [2015] FCAFC 12; (2015) 104 ACSR 384
Re Alora Davies Developments 104 Pty Ltd [2021] NSWSC 1853
Re Federation Health Ltd (admin apptd) [2006] FCA 314
Re North Sydney District Rugby League Football Club (admin apptd); Murray v Donnelly [2000] NSWSC 634; (2000) 34 ACSR 630
Re Project Volar Creditor's Trust established in the administration of each of Virgin Australia Holdings Ltd [2022] NSWSC 307
Re Promoseven Pty Ltd v Markey; Bluechip Development Corp (Cairns) Pty Ltd (in liq) (recs and mgrs apptd) [2013] FCA 1281
Re St Gregory's Armenian School Inc [2015] NSWSC 1465; (2015) 109 ACSR 27
Re Trepca Mines Ltd [1960] 3 All ER 304
Re Young (in his capacity as liquidator of Great Wall Resources Pty Ltd (in liq)) [2013] NSWSC 879
Sands Contracting Pty Ltd (in her capacity as executor of estate of the late Sands) v Cant [2021] FCA 638
Tanning Research Laboratories Inc v O'Brien (1987) 5 ACLC 820; (1987) 11 ACLR 778
Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332
Westpac Banking Corp v Totterdell (1998) 17 ACLC 317; (1998) 20 WAR 150

STRK J:

Introduction

By an originating process filed on 24 March 2023, Saxon Travis Ball, Michael Russell Deliu and Made Sumarya commenced a proceeding against Jeremy Joseph Nipps as liquidator of Ochre Group Holdings Ltd (in liquidation).
The plaintiffs are directors of Ochre Group Holdings, an unlisted Australian Public Company that was incorporated on 5 October 1978 (at that time under the name Stirling Petroleum NL).[1] Ochre Group Holdings entered into liquidation by a resolution of its members at a general meeting on 14 October 2020.[2] Nathan John Featherby had been a director of Ochre Group Holdings. He ceased to be a director on 12 June 2019 after being declared a bankrupt.[3] On 2 August 2023, pursuant to the Rules of the Supreme Court1971 (WA) O 9A r 2 Kennedy Vinciullo as the solicitors for Mr Ball and Mr Deliu gave notice that Mr Featherby was an interested non‑party to this proceeding.
[1] Affidavit of JJ Nipps sworn 30 May 2023 par 9.
[2] Affidavit of JJ Nipps sworn 30 May 2023 par 3.
[3] Affidavit of JJ Nipps sworn 30 May 2023 pars 11 - 12.
By this proceeding, the plaintiffs sought relief under the Corporations Regulations 2001 (Cth) reg 5.6.54(2) and the Insolvency Practice Schedule (Corporations) s 90-15(1), sch 2 of the Corporations Act 2001 (Cth). Each of the plaintiffs applied for orders revoking the rejection of their respective proofs of debt by Mr Nipps; admitting their proofs of debt; and requiring Mr Nipps to call a meeting of the creditors for the purpose of resolving that Mr Nipps be removed as the liquidator of Ochre Group Holdings.

Programming orders were made shortly after the proceeding was commenced,[4] and the timetable for the filing of documents in advance of the hearing was extended various times by the consent of the parties. The applications made by the originating process were listed for hearing on 15 August 2023.
[4] The orders of Hill J made on 30 March 2023.
From 25 July 2023 to 28 July 2023, Mr Nipps conducted public examinations pursuant to s 596A and s 596B of the Corporations Act in respect of Ochre Group Holdings in the Federal Court of Australia (WA Registry). Over that period, four people gave evidence, including Mr Ball and Mr Deliu.[5]
[5] Affidavit of BH Taylor sworn 7 August 2023 pars 5 - 6, referring to Federal Court proceeding WAD 38 of 2023.
Summonses for examination were issued by the Federal Court to Mr Sumarya and Mr Featherby on 3 April 2023, however I understand that neither appeared on their respective summonses. Further, I understand that an interlocutory hearing is to be listed to determine the question of whether a warrant for the arrest of Mr Sumarya or Mr Featherby should be issued for their respective failures to comply with the summonses for examinations issued and addressed to them pursuant to r 11.10(2) of the Federal Court (Corporations) Rules 2000 (Cth).[6]
[6] Affidavit of BH Taylor sworn 7 August 2023 pars 7 - 9; ts 59 (11 September 2023).
At the hearing in this court of the plaintiffs' application made by originating summons on 15 August 2023, the following issues arose for determination. First, what orders ought be made in relation to the applications of Mr Ball and Mr Deliu? Secondly, what orders ought be made in relation to Mr Sumarya's application? Thirdly, what if any orders ought be made concerning Mr Featherby?
On 15 August 2023, as to the first issue, I dismissed the applications of Mr Ball and Mr Deliu. My reasons for so ordering were then provided,[7] and are set out below. As Mr Sumarya failed to appear I adjourned the hearing of Mr Sumarya's application to 11 September 2023; and reserved to that date my decision concerning the third issue and the orders that ought be made with respect to Mr Featherby. The orders made on 15 August 2023 are reproduced at sch A to these reasons.
[7] ts 29 - 30 (15 August 2023).
On 11 September 2023, Mr Sumarya again failed to appear and I determined that as to the second issue, it was appropriate that Mr Sumarya's application proceed to be heard and determined in his absence. Submissions had been made on behalf of Mr Nipps on 15 August 2023 as to the merits of Mr Sumarya's application. I had regard to the same. On the evidence before the court, Mr Sumarya's application was dismissed and costs ordered in Mr Nipps' favour. My reasons are set out below.
As to the third issue, by a communication received on 8 September 2023, I was informed that Mr Nipps no longer pressed for orders to be made against Mr Featherby at this time.[8] The orders made on 11 September 2023 concerning the second and third issues are reproduced at sch B to these reasons.
[8] see also ts 57 - 58 (11 September 2023).

Evidence

At the hearing on 15 August 2023, counsel for Mr Nipps read three affidavits.
The first was the affidavit sworn on 7 August 2023 by Brendan Hamish Taylor, a partner of Mills Oakley who has the day to day to conduct of this matter on behalf of Mr Nipps, to which Mr Taylor had attached documents marked BHT‑1 to BHT‑10. Among other things, Mr Taylor deposed that transcripts for each day of the examination proceeding before the Federal Court were prepared by transcript provider VIQ Solutions and obtained by Mr Nipps following the examination proceeding, and Mr Taylor attached to his affidavit true copies of the transcripts of the examinations of Mr Ball and Mr Deliu, which he marked BHT‑2 and BHT‑1 respectively.
The second was the affidavit sworn 11 August 2023 by James Alexander Raymond, a solicitor at Mills Oakley, to which Mr Raymond had attached documents marked JAR‑1 to JAR‑15.
The third was the second affidavit of Mr Raymond sworn 15 August 2023, to which Mr Raymond had attached a document marked JAR‑16.
Counsel for Mr Nipps indicated that Mr Nipps also relied upon four additional affidavits.[9] The first was the affidavit sworn 24 March 2023 by Mr Ball, a director of Ochre Group Holdings and the first plaintiff, which affidavit had been filed in support of the plaintiffs' application and to which Mr Ball had attached documents marked SB‑1 to SB‑16.
[9] ts 48 (15 August 2023).
The second was the affidavit sworn 24 March 2023 by Mr Deliu, a director of Ochre Group Holdings and the second plaintiff, which affidavit had been filed in support of the plaintiffs' application and to which Mr Deliu had attached documents marked MRD-1 to MRD-16.
The third was the affidavit sworn 30 May 2023 by Mr Nipps, the liquidator of Ochre Group Holdings and defendant, which affidavit had been filed in opposition to the plaintiffs' application and to which Mr Nipps had attached documents marked JJN‑1 to JJN‑177.
The fourth was the second affidavit of Mr Deliu sworn on 22 June 2023, filed in support of the plaintiffs' application and in response to Mr Nipps' affidavit sworn 30 May 2023.

Issue 1 - What orders ought be made in relation to the applications of Mr Ball and Mr Deliu?

On 15 August 2023, Mr Ball and Mr Deliu consented to the dismissal of their applications. Counsel for Mr Ball, Mr Deliu and Mr Nipps by consent pursuant to the Rules of the Supreme Court O 43 r 16, moved for orders in the following terms:[10]
1. The first and second plaintiffs' applications commenced by originating process filed on 24 March 2023 be, and are hereby, dismissed.
2. All extant costs orders with respect to the first and second plaintiffs and the defendant in the proceedings be and are hereby vacated.
3. The first and second plaintiffs pay the defendant's costs with respect to the first and second plaintiffs' applications fixed in the sum of $80,000, forthwith.
[10] Memorandum of consent orders filed on behalf of Mr Nipps on 7 August 2023, signed by the solicitors for Mr Ball and Mr Deliu and the solicitors for Mr Nipps.
After hearing counsel for Mr Ball, Mr Deliu and Mr Nipps, there did not appear to be any reason not to make orders in the terms promoted,[11] and accordingly I made orders 1 to 3 of the orders reproduced at sch A to these reasons. Counsel for Mr Ball and Mr Deliu was, on his request, excused from attendance at the remainder of the hearing.[12]
[11] ts 27, 29 - 30 (15 August 2023).
[12] ts 27 - 30 (15 August 2023).

Issue 2 - What orders ought be made in relation to Mr Sumarya's application?

While all three plaintiffs were represented by Kennedy Vinciullo when the proceeding was commenced and the applications listed for hearing, Kennedy Vinciullo ceased to act for Mr Sumarya on 26 July 2023.

Since then the court has sent various communications to Mr Sumarya. The court understands that Mr Sumarya is presently in Indonesia,[13] and has sent its communications to the email and postal addresses for Mr Sumarya as were known to Kennedy Vinciullo.[14] The court has received no response to those communications and Mr Sumarya has not appeared at any hearing since Kennedy Vinciullo ceased to act on his behalf.
[13] Affidavit of BH Taylor sworn 7 August 2023, BHT-1 page 29; also the affidavit of TW Kennedy sworn 20 July 2023 in support of the application made by Kennedy Vinciullo pursuant to O 8 r 7 of the Rules of the Supreme Court to cease to act as the solicitors for Mr Sumarya.
[14] ts 27 - 30 (15 August 2023).
On 27 July 2023, my associate emailed Mr Sumarya and the represented parties and, among other things, notified them of the court's intention to list the proceeding for directions on 1 August 2023. Mr Sumarya was asked to confirm his availability to attend the directions hearing and confirm whether he wished to appear. Mr Sumarya was also asked whether he intended to be heard at the substantive hearing listed on 15 August 2023.
On 1 August 2023, my associate again emailed Mr Sumarya and among other things, provided a Microsoft Teams link to the hearing on 1 August 2023. Mr Sumarya did not attend the directions hearing on 1 August 2023 via Microsoft Teams or in person.
On 3 August 2023, a copy of the transcript from the directions hearing on 1 August 2023 was emailed and posted to the email and postal addresses for Mr Sumarya as were known to Kennedy Vinciullo.
On 8 August 2023, the proceeding was again listed for directions, with notice to Mr Sumarya and the represented parties. Mr Sumarya was provided with a Microsoft Teams link to facilitate his attendance at the hearing, but he did not appear.
On 11 August 2023, my associate emailed Mr Sumarya again giving notice of the substantive hearing of his application on 15 August 2023. The email informed Mr Sumarya that the court understood that counsel for Mr Nipps intended at the hearing to ask the court to dismiss his application made by originating process filed on 24 March 2023. The court informed Mr Sumarya that if he did not attend the hearing in person or remotely orders may be made in his absence, which may include his application being dismissed, and that he pay Mr Nipps' costs of defending the application. The court requested that Mr Sumarya advise by return email whether he intended to appear in person at the hearing or seek to appear by telephone or Microsoft Teams. It was also recommended that Mr Sumarya obtain legal advice prior to the hearing. No response was received.
On 15 August 2023, in light of his failure to attend to prosecute his application, counsel on behalf of Mr Nipps submitted that Mr Sumarya's application ought be dismissed.[15]
[15] ts 30 (15 August 2023).
After hearing counsel on 15 August 2023, I was not then prepared to substantially hear Mr Sumarya's application and determine the same in his absence. I considered it appropriate to afford Mr Sumarya a final opportunity to appear to prosecute his proceeding against Mr Nipps, and/or to be heard as to costs. Accordingly, I made order 4 of the orders reproduced at sch A to these reasons.
On 17 August 2023, the orders and transcript of the hearing on 15 August 2023, which contained notice of the adjournment of the substantive hearing of his application to 11 September 2023 at 9.30 am, were sent to Mr Sumarya by registered post to the address for Mr Sumarya as was known to Kennedy Vinciullo. No response was received from Mr Sumarya.
On 5 September 2023, my associate emailed Mr Sumarya again giving notice of the substantive hearing of his application listed on 11 September 2023 at 9.30 am. The email informed Mr Sumarya that, as recorded in the orders, by the consent of Mr Ball and Mr Deliu, the applications of Mr Ball and Mr Deliu commenced by originating process filed on 24 March 2023 had been dismissed, and they had been ordered to pay Mr Nipps' costs with respect to their applications fixed in the sum of $80,000.00. Mr Sumarya was also informed that in his absence, counsel for Mr Nipps moved for the dismissal of Mr Sumarya's application and for an order that Mr Sumarya pay Mr Nipps' costs of his application in an amount to be taxed if not agreed. The court further informed Mr Sumarya that if he did not attend the hearing in person or remotely, orders may be made in his absence, which may include his application being dismissed, and that he pay Mr Nipps' costs of defending his application. The court requested that Mr Sumarya advise by return email whether he intended to appear in person at the hearing or seek to appear by telephone or Microsoft Teams. It was also recommended that Mr Sumarya obtain legal advice prior to the hearing. Again, no response was received from Mr Sumarya.
On 8 September 2023, my associate emailed Mr Sumarya and provided a Microsoft Teams link to the hearing on 11 September 2023.
On 11 September 2023, Mr Sumarya failed to attend the hearing of his application, and counsel on behalf of Mr Nipps again moved that Mr Sumarya's application be considered on its merits in his absence and dismissed.[16]
[16] ts 56 (11 September 2023).
For the reasons set out below, it was appropriate that Mr Sumarya's application proceed to be heard and on the merits dismissed. Accordingly, I made orders 1 and 2 of the orders reproduced at sch B to these reasons.

Power

Counsel on behalf of Mr Nipps submitted that the court had the power to consider and determine Mr Sumarya's application in his absence.[17] The power initially referenced and relied upon on behalf of Mr Nipps was that found in the Rules of the Supreme Court O 34 which order concerns proceedings at trial, particularly r 2 which provides that if, when a trial is called on, one party does not appear the judge may proceed with the trial of the action or of any counterclaim in the absence of that party.
[17] ts 30 (15 August 2023).
Prior to the hearing on 15 August 2023, my associate wrote to the represented parties and Mr Sumarya and indicated that should Mr Sumarya not attend the hearing of his application and Mr Nipps press for dismissal, I would ask counsel to address, among other things, whether the Rules of the Supreme Court that concern proceedings at trial apply, alternatively those which concern proceedings commenced by originating summons (particularly, O 58 r 22).
Order 58 of the Rules of the Supreme Court concerns proceedings by originating summons, which are civil proceedings between parties which may be heard in chambers. Order 58 r 22 concerns hearings in the absence of a party, and sub‑rule (1) affords the court a discretion similar to that which may be exercised at a trial pursuant to O 34 r 2. Order 58 r 22(1) provides:
Where any party to an originating summons fails to attend at the first or any resumed hearing thereof, the Court may proceed in his absence if, having regard to the nature of the application, it thinks it expedient to do so.
As Mr Sumarya did not attend the hearing on 15 August 2023, counsel for Mr Nipps moved for the dismissal of Mr Sumarya's application, and in response to the court's query, submitted that the Rules of the Supreme Court O 58 r 22 ought apply.[18] On 11 September 2023, counsel for Mr Nipps again moved for dismissal in Mr Sumarya's absence.[19]

Disposition concerning power

[18] ts 30 (15 August 2023).

[19] ts 56 (11 September 2023).

The proceeding commenced by Mr Sumarya through his former solicitors by the originating process filed on 24 March 2023 was a proceeding in the court under the Corporations Act which was commenced on or after the commencement of the Supreme Court (Corporations) WA Rules 2004 (WA). Unless the court were to otherwise order, the Supreme Court (Corporations) WA Rules applied to the proceeding commenced by Mr Sumarya through his former solicitors.[20]
[20] Supreme Court (Corporations) WA Rules r 1.3(1).

By operation of r 1.3(2)(a) of the Supreme Court (Corporations) WA Rules, the other rules of the court apply, to the extent that they are relevant and not inconsistent with the Supreme Court (Corporations) WA Rules, to a proceeding in the court under the Corporations Act that is commenced on or after the commencement of the Supreme Court (Corporations) WA Rules. That is, to the extent that they were relevant and not inconsistent with the Supreme Court (Corporations) WA Rules, the Rules of the Supreme Court applied to the proceeding commenced by Mr Sumarya.
Under r 1.8 of the Supreme Court (Corporations) WA Rules the court may give directions in relation to the practice and procedure to be followed in a proceeding if it is satisfied, in the circumstances of the proceeding, that:
(a)the provisions of the Corporations Act, the Australian Securities and Investments Commission Act 2001 (Cth), or the rules of this court do not adequately provide for the practice and procedure to be followed in the proceeding; or
(b) a difficulty arises, or doubt exists, in relation to the practice and procedure to be followed in the proceeding.
While I was cognisant of there being this power to make directions, I proceeded on the basis that the Supreme Court (Corporations) WA Rules were silent as to what was to occur should an applicant fail to attend the hearing of a proceeding prosecuted under the Corporations Act. I also accepted that in the absence of a prescribed procedure, the Rules of the Supreme Court applied to the extent that they were relevant and not inconsistent with the Supreme Court (Corporations) WA Rules.

As the application made by Mr Sumarya by the originating process filed on 24 March 2023 was one which would be heard in the chambers jurisdiction of the court, I considered that the procedure set out in the Rules of the Supreme Court O 58 appeared to be the more appropriate to be applied in this proceeding than the procedure for trials of proceedings commenced by writ.
Applying the Rules of the Supreme Court O 58 r 22(1), I accepted that I had the power to proceed in Mr Sumarya's absence if having regard to the nature of the application, I considered it expedient to do so.
For completeness, I also note that I proceeded on the basis that the Rules of the Supreme Court O 58 r 22 did not empower the court to dismiss without hearing an originating summons should the party who filed it fail to attend (for example, to dismiss an originating summons for want of prosecution).[21] A hearing was required.

Alternative - springing order pursuant to the Rules of the Supreme Court O 4A r 23

[21] Keyside Investments WA Pty Ltd v Quartz Water (Leonora) Pty Ltd [2001] WASCA 156 [25], as discussed in LexisNexis, Civil Procedure Western Australia (online version) at [58.22.1].

Prior to the hearing on 15 August 2023, my associate wrote to the represented parties and Mr Sumarya by email and indicated that should Mr Sumarya not attend the hearing of his application, I would also ask counsel to address, among other things, whether it might be appropriate as an alternative to proceeding in Mr Sumarya's absence, to make a springing order pursuant to the Rules of the Supreme Court O 4A r 23 that unless certain action is taken (for example, by Mr Sumarya filing a notice of intention to proceed with his application within a prescribed time), Mr Sumarya's application be put on the Inactive Cases List.
Mr Sumarya did not attend the hearing on 15 August 2023 and counsel informed the court that Mr Nipps opposed the making of a springing order pursuant to the Rules of the Supreme Court O 4A r 23 as an alternative to the substantive hearing of Mr Sumarya's application in his absence.[22]
[22] ts 32 - 35 (15 August 2023).
It was submitted that prejudice would flow from delay if such a course was adopted. As to prejudice, Mr Raymond at par 29 of his affidavit described the potential prejudice in the following terms:
(a) there would remain, on the public record, an application by a person alleging he is a creditor, for a meeting to be called to vote on a resolution to remove the defendant as a liquidator on the basis that the liquidation is not being properly progressed;
(b) acting properly, if the applications were unresolved, the defendant may need to consider whether the work plan for the immediate future may need to be modified to enable any new liquidator to easily take over the matter; and
(c) acting properly, the defendant, in reporting to the Company's creditors and members following the Examination Proceedings, will be required to inform the Company's creditors and members that there remains, on the public record, an application by a person alleging he is a creditor, for a meeting to be called to vote on a resolution to remove the defendant as liquidator on the basis that the liquidation is not being properly progressed.

Disposition - appropriate way forward

In considering what would be the appropriate way to proceed, I gave careful consideration to whether I ought exercise the power under O 4A r 23 as an alternative to acceding to Mr Nipps' request that Mr Sumarya's application be heard in his absence.
In determining the appropriate way forward, I was cognisant of the value of the debt that Mr Sumarya by this proceeding sought be admitted, which was $65,000. At the hearing on 15 August 2023, I enquired of counsel for Mr Nipps whether Mr Sumarya's alleged debt of $65,000, if admitted, would be sufficient to compel Mr Nipps to convene a meeting of creditors under reg 75.15(1)(c) or (d) of the Corporations Regulations, and how that might inform how the court ought proceed.[23] Counsel for Mr Nipps confirmed that if admitted, a debt of $65,000 would be sufficient to compel Mr Nipps to convene a meeting of creditors of Ochre Group Holdings, as the requirements of s 75-15(1)(c)/(d) would be satisfied.[24]
[23] ts 32 (15 August 2023).
[24] ts 32 - 37 (15 August 2023); affidavit of ST Ball sworn 24 March 2023, SB-11.
Although Mr Sumarya's alleged debt is a relatively modest one, I weighed in the balance the implications of leaving unresolved the question of whether such a debt ought be admitted, particularly when considering the weight that ought be given to the potential prejudice deposed by Mr Raymond. I was cognisant that there would be no certainty for Mr Nipps or the creditors of Ochre Group Holdings until about April 2024 if a springing order had been made pursuant to O 4A r 23 (that is, if an order was made and Mr Sumarya failed to comply with the order so that his case was placed on the Inactive Cases List, and Mr Sumarya then took no step to have his case removed from the Inactive Cases List).
Counsel for Mr Nipps also submitted that Mr Sumarya's application was without merit, which was a matter which also ought weigh in favour of the court exercising its discretion under the Rules of the Supreme Court O 58 r 22 to proceed, and did not favour the making of a springing order pursuant to O 4A r 23.
In the end, having regard to the opportunity afforded to Mr Sumarya to be heard, the uncertainty that would flow for at least six months if I were to make a springing order under O 4A r 23, and the strength of Mr Sumarya's claims based on the affidavits filed in the proceeding (which I discuss further below), on 11 September 2023 I considered that it was appropriate to proceed in the manner promoted on behalf of Mr Nipps. That is, having regard to the nature of the application, I considered it expedient to proceed.

Consideration of merits and substantive determination

In so far as Mr Sumarya was concerned, by the originating process filed on 24 March 2023 relief was sought in the following terms:
7.Pursuant to subregulation 5.6.54(2) of the Corporations Regulations, the defendant's rejection of the third plaintiff's proof of debt in the amount of $65,000 be revoked; and
8.The defendant be ordered to admit the third plaintiff's proof of debt in the amount of $65,000 or some other amounts as determined by this Honourable Court.
9.The defendant pay the third plaintiff's costs of this application.
Further, with Mr Ball and Mr Deliu, Mr Sumarya sought the following relief in addition to costs:
10.Pursuant to 90-15(1) of the Insolvency Practice Schedule, a declaration that the plaintiff's Written Direction dated 12 January 2023 (Written Direction) was reasonable; and
11.Pursuant to 90-15(1) of the Insolvency Practice Schedule, the defendant be directed to call a meeting of creditors for the purposes outlined in the Written Direction.

Nature of an appeal against liquidator's rejection

An appeal against a liquidator's rejection of a proof is not a proceeding against a company but an appeal from the liquidator when he or she was acting as an officer of the court in a quasi‑judicial function.[25] That part of Mr Sumarya's application made pursuant to reg 5.6.54(2) of the Corporations Regulations, though referred to as an appeal, is heard by the court as a hearing de novo.[26]
[25] Tanning Research Laboratories Inc v O'Brien (1987) 5 ACLC 820; (1987) 11 ACLR 778; reversed on other grounds O'Brien v Tanning Research Laboratories Inc (1988) 7 ACLC 182; (1988) 84 ALR 221; further appeal dismissed Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, cited in Ford HAJ, Austin RP and Ramsay IM, Ford, Austin & Ramsay's Principles of Corporations Law (online version) at [27.441.15].
[26] Re Trepca Mines Ltd [1960] 3 All ER 304; Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332; Re Federation Health Ltd (admin apptd) [2006] FCA 314 [32] ‑ [36]; Re North Sydney District Rugby League Football Club (admin apptd); Murray v Donnelly [2000] NSWSC 634; (2000) 34 ACSR 630 [3]; Re Promoseven Pty Ltd v Markey; Bluechip Development Corp (Cairns) Pty Ltd (in liq) (recs and mgrs apptd) [2013] FCA 1281 [34]; reversed on appeal, but not regarding the statement of principles relating to s 1321: Promoseven Pty Ltd v Markey; Bluechip Development Corp (Cairns) Pty Ltd (in liq) (recs and mgrs apptd) [2015] FCAFC 12; (2015) 104 ACSR 384, cited in Ford HAJ, Austin RP & Ramsay IM, Ford, Austin & Ramsay's Principles of Corporations Law (online version) at [27.441.15].
In considering Mr Sumarya's appeal, I proceeded on the basis that I ought consider the merits of Mr Sumarya's claim and decide for myself as to the existence and amount of the debt,[27] but it remained incumbent on Mr Sumarya to show that Mr Nipps was wrong.[28] If that onus is not discharged the court will not overturn the liquidator's

decision. If the court is unable to conclude either way whether the proof should be admitted, then the liquidator's decision must stand.[29]
[27] Ford HAJ, Austin RP & Ramsay IM, Ford, Austin & Ramsay's Principles of Corporations Law (online version) at [27.441.15].
[28] Westpac Banking Corp v Totterdell (1998) 17 ACLC 317; (1998) 20 WAR 150, cited in Ford HAJ, Austin RP & Ramsay IM, Ford, Austin & Ramsay's Principles of Corporations Law (online version) at [27.441.15].
[29] In McMillan Investment Holdings Pty Ltd v Morgan [2023] FCAFC 9; (2023) 295 FCR 543 [102], Yates J noted that 'Of particular importance to the notice of contention is the fact that the liquidator's decision to reject a proof of debt stands unless the claimant demonstrates that the liquidator's decision was wrong': see also Westpac Banking Corp v Totterdell (451); Brodyn Pty Ltd t/as Time Cost and Quality v Dasein Constructions Pty Ltd [2004] NSWSC 1230; (2005) 21 BCL 443 [32] ‑ [33]; Re St Gregory's Armenian School Inc [2015] NSWSC 1465; (2015) 109 ACSR 27 [35].

In Re Project Volar Creditor's Trust,[30] which concerned the review of a decision of a trustee of a creditor's trust, Black J drew an analogy as between an appeal against a liquidator's ruling on a proof of debt and a trustee rejecting a proof of debt. His Honour referred with approval to Re Alora Davies Developments 104 Pty Ltd [2021] NSWSC 1583 at [22] where Williams J observed that:
In order to demonstrate that the Liquidator's decision was wrong, the plaintiff must adduce evidence establishing that the debts in question were true liabilities of the Company as at the date of winding up. The Court must be satisfied of this on the balance of probabilities before the Liquidator's decision rejecting the proof of debt will be set aside. That requires the Court to feel actual persuasion that the alleged debts were true liabilities of the Company: Warner v Hung; In the matter of Bellpac Pty Ltd (receivers and managers appointed) (in liquidation) (No. 2) (2011) 297 ALR 56; [2011] FCA 1123 at [48].
[30] Re Project Volar Creditor's Trust established in the administration of each of Virgin Australia Holdings Ltd[2022] NSWSC 307 [31].
In hearing an appeal, the court must take into account all relevant evidence, whether or not it was before the liquidator at the time the proof was rejected.[31] I also proceeded on the basis that on an appeal such as this, the court acts on the evidence that is placed before it, as there is no rule or practice whereby the material before the liquidator is automatically material before the court when considering whether to affirm the liquidator's decision or not.[32]

Written direction of creditors directing a meeting be convened

[31] McMillan Investment Holdings Pty Ltd v Morgan [102] (Yates J), citing Kunc J in Re Young (in his capacity as liquidator of Great Wall Resources Pty Ltd (in liq)) [2013] NSWSC 879 [46] ‑ [47] (followed in Promoseven Pty Ltd v Markey; Bluechip Development Corp (Cairns) Pty Ltd (in liq) (recs and mgrs apptd) [2013] FCA 1281 [37]; Sands Contracting Pty Ltd (in her capacity as executor of estate of the late Sands) v Cant [2021] FCA 638 [14] and 5G Developments Pty Ltd (formerly known as Denham Wyndham Pty Ltd) (in liq) v Massie [2021] FCA 791 [146]).

[32] Brodyn Pty Ltd t/as Time Cost and Quality v Dasein Constructions Pty Ltd [33]; Ford HAJ, Austin RP & Ramsay IM, Ford, Austin & Ramsay's Principles of Corporations Law (online version) at [27.441.15].

Division 75 of the Insolvency Practice Schedule (Corporations) concerns meetings, and as outlined in s 75‑1, in most cases, the external administrator of a company may convene creditor or company meetings at any time and must convene them in particular circumstances, for example when directed to do so by certain creditors or ASIC.
Section 75-15 of the Insolvency Practice Schedule (Corporations) provides as follows:
75‑15External administrator must convene meeting in certain circumstances
(1)The external administrator of a company must convene a meeting of the creditors if:
(a)where there is a committee of inspection—the committee of inspection directs the external administrator to do so; or
(b)the creditors direct the external administrator to do so by resolution; or
(c)at least 25% in value of the creditors direct the external administrator to do so in writing; or
(d)both of the following are satisfied:
(i)less than 25%, but more than 10%, in value of the creditors direct the external administrator to do so in writing;
(ii)security for the cost of holding the meeting is given to the external administrator before the meeting is convened; or
(e)all of the following are satisfied:
(i)the company is being wound up under a creditors' voluntary winding up;
(ii)less than 25%, but more than 5%, in value of the creditors direct the external administrator to do so in writing;
(iii)none of the creditors who give the direction is a related entity in relation to the company;
(iv)the direction is given no more than 20 business days after the resolution for the voluntary winding up of the company is passed.
(2)However, the external administrator need not comply with the direction if the direction is not reasonable.
(3)The Insolvency Practice Rules may prescribe circumstances in which a direction is, or is not, reasonable.
(4)For the purposes of paragraphs (1)(c), (d) and (e), the value of the creditors is to be worked out by reference to the value of the creditors' claims against the company that are known at the time the direction is given.
(5)This section does not apply if:
(a)the external administrator is a provisional liquidator of the company; or
(b)the external administrator is the administrator of the company and the company is under administration.
As to the circumstances in which a direction is, or is not, reasonable, they are prescribed in the Insolvency Practice Rules (Corporations) 2016 (Cth) at r 75-250.

Evidence

Affidavits in support of the originating process were sworn by Mr Ball and Mr Deliu. Although Mr Sumarya was represented in the proceeding at its commencement by Kennedy Vinciullo, Mr Sumarya did not make an affidavit in support of the relief sought on his own behalf. Since Kennedy Vinciullo ceased acting for Mr Sumarya, he has not participated in the proceeding and therefore no affidavit evidence of Mr Sumarya was before the court.
A copy of Mr Sumarya's proof of debt; the written direction the subject of his application; the deed of acknowledgment of debt said to ground the debt sought to be proved; and Mr Nipps' rejection of Mr Sumarya's proof of debt were attached to the various affidavits made by Mr Ball, Mr Deliu and Mr Nipps.[33]
[33] Affidavit of ST Ball sworn 24 March 2023, SB-12; affidavit of MR Deliu sworn 24 March 2023, MRD-16; affidavit of JJ Nipps sworn 30 May 2023 par 96, JJN-36.
To the extent Mr Sumarya's proof of debt was supported by evidence, it was through the affidavits made by Mr Ball and by Mr Deliu. Mr Sumarya did not depose to the circumstances in which he said the debt arose. Further, there was no evidence on his part as to the circumstances which led to the written direction being issued to Mr Nipps pursuant to s 75-15 of the Insolvency Practice Schedule (Corporations), or of the reasonableness of the same.
In considering the merits of Mr Sumarya's application for relief, I gave careful consideration to the evidence filed in the proceeding. I describe below those parts relevant to the disposition of Mr Sumarya's application.
There is evidence that Mr Sumarya was appointed a director of Ochre Group Holdings on 5 August 2019, and remains a director.[34]
[34] Affidavit of ST Ball sworn 24 March 2023, SB-1 page 13; affidavit of MR Deliu sworn 24 March 2023, MRD‑1 page 13; affidavit of JJ Nipps sworn 30 May 2023 par 11, JJN-4.
Ochre Group Holdings entered into liquidation by a resolution of its members at a general meeting on 14 October 2020.[35]
[35] Affidavit of JJ Nipps sworn 30 May 2023 par 3.
Mr Nipps deposed that prior to his appointment as liquidator, he was not made aware that any of the directors asserted any entitlement to directors' remuneration, or any other fees, or claimed to be unsecured creditors of Ochre Group Holdings.[36]
[36] Affidavit of JJ Nipps sworn 30 May 2023 par 31.
Mr Nipps deposed that prior to his appointment he had seen numerous iterations of the draft Form 520 - Declaration of Solvency, and in none of them were fees or amounts payable to the directors specified, and prior to his appointment he did not receive any documents detailing or acknowledging any debts claimed by the directors.[37] Further, Mr Nipps deposed that the final Form 520 - Declaration of Solvency did not specify fees or amounts payable to the directors.[38]
[37] Affidavit of JJ Nipps sworn 30 May 2023 par 32.
[38] Affidavit of JJ Nipps sworn 30 May 2023 par 45, JJN-15.
However, Mr Nipps acknowledged that on 14 October 2020 he received various company documents, which included copies of the deeds of acknowledgment of debt which ground the proofs of debt the subject of this proceeding.[39]
[39] Affidavit of JJ Nipps sworn 30 May 2023 par 44.
Each of the deeds of acknowledgment of debt purportedly granted in favour of Mr Ball, Mr Deliu and Mr Sumarya refer to fees for services as directors having been accrued pursuant to the terms of their respective appointments as directors which remain unpaid.[40]
[40] Affidavit of JJ Nipps sworn 30 May 2023 par 92; affidavit of ST Ball sworn 24 March 2023, SB-15; affidavit of MR Deliu sworn 24 March 2023, MRD-15.

As to the evidence before the court concerning the accrual of fees for services as directors, Mr Ball and Mr Deliu both deposed that they had understood that from on or around 2011, Ochre Group Holdings had paid its non-executive directors a fee of $1,000 each per month and its executive director a fee of $5,000 per month to compensate them for the services they rendered to maintain the business.[41] Further, at a meeting during June 2019 between Vazrick Hovanessian, a former director of Ochre Group Holdings, Mr Ball and Mr Deliu, it had been agreed that directors' fees would be reinstated at the rates which had been historically paid to the directors of Ochre Group Holdings, being executive director fees of $5,000 per month and non‑executive directors fees of $1,000 per month; and the directors' fees would not be payable until the restructure of Ochre Group Holdings was complete and also because historically the directors' fees would usually be left to accrue for a year and then, if the directors wanted to take payment in shares, this would be approved at an Annual General Meeting or Extraordinary General Meeting.[42]
[41] Affidavit of ST Ball sworn 24 March 2023 pars 9 - 10; affidavit of MR Deliu sworn 24 March 2023 par 8.
[42] Affidavit of ST Ball sworn 24 March 2023 par 12; affidavit of MR Deliu sworn 24 March 2023 par 10.
Mr Ball and Mr Deliu also both deposed that on 28 November 2019 at a meeting of directors of Ochre Group Holdings, it was resolved to set non‑executive directors fees of $3,000 per month and executive chairman fees of $5,000 per month.[43]
[43] Affidavit of ST Ball sworn 24 March 2023, SB-6; affidavit of MR Deliu sworn 24 March 2023, MRD-6.
As to the circumstances in which Mr Nipps was called upon to adjudicate Mr Sumarya's proof of debt, I understood as follows.
Mr Nipps deposed that on 20 January 2023, he received a letter from Kennedy Vinciullo enclosing a written direction pursuant to s 75‑15 of the Insolvency Practice Schedule (Corporations) and declaration of independence, relevant relationships and indemnities (DIRRI) provided by Geoffrey Granger.[44]
[44] Affidavit of ST Ball sworn 24 March 2023, SB-12; affidavit of MR Deliu sworn 24 March 2023, MRD-12.
The written direction contained recitals in the following terms:
A.On 14 October 2020, the members of Ochre Group Holdings Pty Ltd (Company) resolved that the Company be wound up and Jeremy Joseph Nipps was appointed liquidator of the Company.
B.The Company has identified $182,199 in creditors as at the date of this direction which comprises of the following:
(i)$17,199 being fees for legal services provided to the Company by EMS and Murfett Legal plus ASIC registry fees;
(ii)$20,000 payable to Michael Russell Deliu being outstanding fees for services rendered as a director of the Company;
(iii)$80,000 payable to Saxon Ball being outstanding fees for services rendered as a director of the Company;
(iv)$65,000 payable to Made Sumarya being outstanding fees for services rendered as a director of the Company.
The direction was in the following terms:
Pursuant to rule 75-15(1)(c) of the Insolvency Practice Schedule (Corporations), we - being at least 25% in value of the creditors of the Company - direct the external administrator, Jeremy Joseph Nipps, to convene a meeting of creditors for the purpose of:
1.Removing Jeremy Joseph Nipps as external administrator of the Company pursuant to section 90-35(1)(a) of the Insolvency Practice Schedule (Corporations); and
2.Appointing Geoffrey Peter Granger as external administrator of the Company pursuant to section 90-35(1)(b) of the Insolvency Practice Schedule (Corporations).
Mr Nipps deposed that as at 20 January 2023 he had not determined the total number of creditors of Ochre Group Holdings nor the total amount of debt that might be due and payable to its creditors; and he had not received a proof of debt (informal or formal) or adjudicated on a proof of debt in respect of any amount allegedly owed in the winding up of Ochre Group Holdings.[45]
[45] Affidavit of JJ Nipps sworn 30 May 2023 par 90.
Mr Nipps deposed that in response to the written direction, on 27 January 2023 his representatives, Mills Oakley, wrote to Kennedy Vinciullo on behalf of the plaintiffs and requested (among other things) that each of the plaintiffs:[46]
[46] Affidavit of JJ Nipps sworn 30 May 2023 par 91; affidavit of ST Ball sworn 24 March 2023, SB-13; affidavit of MR Deliu sworn 24 March 2023, MRD-13.
(a) complete and return a formal proof of debt pursuant to sub‑regulation 5.6.49(2) of the Corporations Regulations;
(b) produce supporting documentation, including:
(i) any contracts (in addition to the Deeds of Acknowledgment giving rise to the Debts; and
(ii) in accordance with the Proofs of Debt, any:
(A) correspondence they had within their possession, custody or control in respect of the Debts;
(B) unpaid invoices for the services they had allegedly rendered to the Company giving rise to the Debts; and
(C) other agreements (such as service agreements and the like) or statements giving rise to the Debts (in addition to the Deeds of Acknowledgement of Debt); and
(c) provide copies of their passports, drivers licenses and Australian Director Identification Numbers.
By letter dated 10 February 2023, Kennedy Vinciullo sent to Mills Oakley Mr Sumarya's proof of debt dated 1 September 2022 (among other things).[47] The proof of debt by which Mr Sumarya sought to prove a debt in the amount of $65,000 was signed by Mr Kennedy of Kennedy Vinciullo as Mr Sumarya's agent. The cited consideration for the debt was described as a 'Deed of Acknowledgement of Debt (Deed) for services rendered to Company (copy attached - 5 pages)' dated 1 September 2020.[48]
[47] Affidavit of ST Ball sworn 24 March 2023 par 25, SB-15; affidavit of MR Deliu sworn 24 March 2023, MRD‑15.
[48] Affidavit of ST Ball sworn 24 March 2023 par 25, SB-15 page 170; affidavit of MR Deliu sworn 24 March 2023, MRD-15 page 169.
The deed of acknowledgment of debt attached to Mr Sumarya's proof of debt described Mr Sumarya as the 'Creditor' and Ochre Group Holdings as the 'Company'. The recitals of the deed recorded that:
A. The Creditor is a director of the Company and fees for these services have accrued pursuant to the terms of his appointment as a director of the Company and remain unpaid (Debt).
B. The Parties enter into this deed to acknowledge the Debt owing by the Company to the Creditor and the terms by which the Debt is agreed to be paid.
In the deed, the term 'Debt' is defined in cl 1.1 to mean $65,000 (inclusive of Taxes); and 'Date for Payment' is defined in cl 1.1 to mean 30 June 2021. The deed also contained an acknowledgment and an agreement to pay in the following terms:
2. Acknowledgement of Debt by Company
The Company:
(a) agrees and acknowledges that the Company owes the Creditor the Debt; and
(b) acknowledges it is obliged to repay the Debt on the terms set out in this deed.
3. Agreement to pay Debt
(a) The Company agrees to pay the Debt on or before the Date for Payment.
(b) The payment must be made directly to the Creditor into the bank account notified to the Company by the Creditor in writing, or, to the extent a portion of the Debt relates to Taxes, directly to the relevant Government Authority with written confirmation of such payment given to the Creditor, unless otherwise agreed in writing with the Creditor.
(c) If the Company fails to make payment in accordance with clause 3(a), the Debt will become immediately due and payable, and the Creditor shall be entitled to apply to the court for judgement against the Company for the outstanding balance of the Debt, plus reasonable legal costs. The Company agrees to judgement in this regard.
The deed also contained a bar to action provision (cl 4(a) and 4(b)).
The deed acknowledgment of debt appears to have been executed on 1 September 2020 as a deed by Mr Ball and Mr Deliu on behalf of Ochre Group Holdings, and by Mr Sumarya as the 'Creditor'. While the sum of $65,000 was claimed, there was no breakdown in the affidavits filed as to what fees comprised the alleged debt of $65,000.
On 13 February 2023, Mills Oakley wrote to Mr Kennedy of Kennedy Vinciullo, who had executed Mr Sumarya's proof of debt as his agent, and had warranted that he knew that Mr Sumarya's 'debt was incurred for the consideration stated and that the debt, to the best of [Mr Kennedy's] knowledge and belief, remains unpaid and unsatisfied'. Among other things, it was requested that Mr Kennedy:[49]
(a)provide the written documentation by which he was authorised to act for Mr Sumarya as his agent; and
(b)advise how he personally knew that Mr Sumarya's debt was incurred for the consideration stated in Mr Sumarya's proof of debt and the details surrounding how Mr Sumarya's debt arose (other than by way of Sumarya's deed of acknowledgment of debt).
[49] Affidavit of JJ Nipps sworn 30 May 2023 pars 93 - 94, JJN-33.
On 24 February 2023, Kennedy Vinciullo provided to Mills Oakley a second proof of debt for Mr Sumarya. The second proof of debt was signed by Mr Sumarya and dated 23 February 2023, and again enclosed a copy of the deed of acknowledgement of debt in favour of Mr Sumarya.[50]
[50] Affidavit of JJ Nipps sworn 30 May 2023 par 96, JJN-36.
In correspondence sent on 10 March 2023 by Mills Oakley (on behalf of Mr Nipps) to Kennedy Vinciullo (on behalf of the plaintiffs), it was confirmed that Mr Nipps had conducted a further review of the books and records of Ochre Group Holdings for evidence that supported the claims that had been made by the plaintiffs as set out in their respective proofs of debt. Further, the plaintiffs were informed as follows:[51]
[51] Affidavit of JJ Nipps sworn 30 May 2023 par 101; affidavit of ST Ball sworn 24 March 2023 par 26, SB‑16 page 186; affidavit of MR Deliu sworn 24 March 2023, MRD-16 page 185.
36.Having conducted this review, the Liquidator:
(a) confirms that no documents (in addition to the Deeds) have been identified that:
(i) refer to your clients' alleged debts; and
(ii) prove that the Deeds recognise a legitimately due and payable debt; and
(b) notes (with emphasis) the absence of the following documents:
(i) audited end of year financial reports or running accounts of the Company for the financial years 2017 to date;
(ii) director's reports of the Company for the financial years 2017 to date;
(iii) remuneration reports of the Company for the financial years 2017 to date; and
(iv) any executive service agreements (or similar).
In the same correspondence, the plaintiffs were informed that:[52]
[52] Affidavit of ST Ball sworn 24 March 2023 par 26, SB-16 page 186; affidavit of MR Deliu sworn 24 March 2023, MRD-16 page 185.
37. Given that the Company is statutorily required to (amongst other things):
(a) prepare and have audited a financial report for each calendar year [referring to the Corporations Act s 295 and s 301(1)];
(b) prepare a directors' reports for each financial year [referring to Corporations Act s 298]; and
(c) provide the financial report, directors report and auditor's report to members [referring to Corporations Act s 314],
the Liquidator questions whether these documents have in fact ever been prepared, and if so, where they are.
38. With the above in mind, until such time as your clients (as a minimum) produce copies of the documents detailed in paragraph 36(b) above (along with any other supporting documentation), the Liquidator simply cannot accept the Deeds as being determinative of the Company's indebtedness to your clients.
By the correspondence of 10 March 2023, Mr Nipps informed the plaintiffs that he had rejected the plaintiffs' proofs of debt; and as a consequence was not satisfied that the plaintiffs had the right to issue a written direction pursuant to s 75-15(1) of the Insolvency Practice Schedule (Corporations). The correspondence sent by Mills Oakley to Kennedy Vinciullo on 10 March 2023 enclosed Form 537 notices rejecting each of the plaintiffs' proofs of debt.[53]
[53] Affidavit of ST Ball sworn 24 March 2023 par 26, SB-16 page 192; affidavit of MR Deliu sworn 24 March 2023, MRD-16 page 191.
In his affidavit sworn in opposition to the proceeding, Mr Nipps deposed to his reviews and investigations following receipt of the plaintiffs' proofs of debt and to having found no evidence (outside of the deeds themselves):[54]
(a)in support of the alleged debts being due and payable;
(b)of the information contained in the deeds of acknowledgment of debt, including any evidence of the source of that information;
(c)of the manner in which the alleged debts had been incurred or whether they had properly accrued; and
(d)that the amounts asserted to be payable under the deeds of acknowledgment of debt constituted reasonable amounts of non-executive director remuneration in accordance with the Corporations Act.
[54] Affidavit of JJ Nipps sworn 30 May 2023 par 99.
Mr Nipps also deposed that:
(a)he has been unable to reconstruct the books and records of Ochre Group Holdings;[55]
[55] Affidavit of JJ Nipps sworn 30 May 2023 par 36.
(b)he has never sighted the original deeds of acknowledgment of debt;[56]
[56] Affidavit of JJ Nipps sworn 30 May 2023 par 47.
(c)he requested key documents including the financial statements, profit and loss and balance sheet statements and tax returns for Ochre Group Holdings for the three years preceding his appointment,[57] and to date has received limited documents. He has not been provided copies of the financial statements from at least 2018 onwards, nor management accounts from at least July 2017;[58]
(d)on 14 October 2020, he received an email from a current shareholder and former director of Ochre Group Holdings raising concerns relating to the conduct of the directors and transactions in the lead up to Mr Nipps' appointment, in particular the transfer and consideration paid for Ochre Group Holdings' interest in 50,000,000 ordinary shares in Ascot Resources Limited;[59]
(e)since that time, a significant proportion of the work performed has been to investigate and make enquiries in relation to the business and affairs of Ochre Group Holdings in the period prior to his appointment, with a particular focus on any transactions or conduct that resulted in the removal of valuable assets from the company;[60]
(f)through the investigations, which remain ongoing, he has become aware that a number of transactions in the 12 months or so leading up to his appointment resulted in a significant proportion of the value, and valuable assets, of Ochre Group Holdings being removed from the company and its members;
(g)[Redacted];
(h)the plaintiffs were informed of his investigations and his concerns regarding certain transactions on several occasions (in addition to what was circulated in his reports);[61]
(i)the first time he received notice of the directors' complaint about his conduct as the liquidator of Ochre Group Holdings was in or about November 2022;[62]
(j)in the period from his appointment to the commencement of this proceeding and in performing the work detailed in his affidavit, Mr Nipps and Cor Cordis had invested and incurred a substantial amount of time and cost in advancing the liquidation of Ochre Group Holdings, and Mr Nipps described in his affidavit the work performed and the substantial fees incurred in performing the same;[63]
(k)in his view, compliance with the written direction would cause substantial prejudice to the members of Ochre Group Holdings, as substantial work would need to be duplicated (at considerable cost), and the liquidation would be delayed; and
(l)he considered the written direction to vexatious, given the circumstances in which it was issued.[64]
[57] Affidavit of JJ Nipps sworn 30 May 2023 par 53, JJN-22.
[58] Affidavit of JJ Nipps sworn 30 May 2023 pars 54 - 56, 66, 70.
[59] Affidavit of JJ Nipps sworn 30 May 2023 par 61.
[60] Affidavit of JJ Nipps sworn 30 May 2023 par 73.
[61] Affidavit of JJ Nipps sworn 30 May 2023 par 80.
[62] Affidavit of JJ Nipps sworn 30 May 2023 par 83.
[63] Affidavit of JJ Nipps sworn 30 May 2023 pars 84 - 85.
[64] Affidavit of JJ Nipps sworn 30 May 2023 pars 123 - 125.
In considering the evidence before me, I also gave careful consideration to the transcripts of examination of Mr Ball and Mr Deliu in the Federal Court. In his affidavit of 7 August 2023, Mr Taylor helpfully identified and summarised aspects of the evidence of Mr Ball and Mr Deliu. While I had regard to the transcript as a whole, it is convenient to reproduce pars 11 and 12 of his affidavit below:
11. The evidence given by [Mr Deliu] at the Examination Proceedings on 27 July 2023 included (among other things) that:
(a) [Mr Deliu] consulted with Mr Featherby in relation to decision making and what instructions to give to lawyers in these proceedings matter (see annexure BHT-1 at page 18);
(b) [Mr Deliu] was not paying his own legal fees and believed that Mr Featherby was paying [Mr Deliu's] legal costs in relation to these proceedings (see annexure BHT-1 at page 18);
(c) Mr Featherby was involved in the decision to bring these proceedings (see annexure BHT- 1 at page 19);
(d) [Mr Deliu] was reliant on Mr Featherby's views on whether the liquidation was taking too long or not and whether it was costing too much or not (see annexure BHT-1 at page 19);
(e) in [Mr Deliu's] time as a director up until the members' voluntary liquidation, in [Mr Deliu's] view all of the decisions of the Company were made by Mr Featherby and Mr Ball, and [Mr Deliu] did not have a conversation with Mr Featherby or Mr Ball about whether the transactions should be entered into and [Mr Deliu] never refused to sign a document he was asked to sign (see annexure BHT-1 at page 75);
(f) [Mr Deliu] did not disclose any involvement by [Mr Sumarya] in the commencement of these proceedings (see annexure BHT-1 at pages 18 and 19);
(g)[Mr Deliu] has never met or communicated directly with [Mr Sumarya] and cannot recall ever being part of a conversation involving [Mr Sumarya] or exchanging any form of electronic communication with him (see annexure BHT-1 at page 28 and 29);
(h) the signature purporting to be that of [Mr Deliu] on page 5 of the document behind tab 137 of volume 3 of 'MFI-1' in the Examination Proceedings was not the signature of [Mr Deliu], nor was any of the handwriting on that document [Mr Deliu's] (see annexure BHT-1 at page 65). Tab 137 of volume 3 of MFI 1 in the Examination Proceedings is:
(i) a document titled 'Deed of Acknowledgement of Debt' said to be between the Company and [Mr Sumarya];
(ii) purported to be signed by [Mr Ball and Mr Deliu] as director and director/secretary of the Company, respectively;
(iii) the same document that was attached to the proof of debt of [Mr Sumarya] which formed part of annexure 'SB-15' of [Mr Ball's] affidavit sworn on 24 March 2023 (at pages 170 - 176) and annexure 'MRD-15' of [Mr Deliu's] affidavit sworn on 24 March 2023 (at pages 169 - 175), both filed in these proceedings
(Sumarya DoA);
(i) [Mr Deliu's] actual signature is as written on a blank piece of paper and provided by [Mr Deliu] during the Examination Proceedings and marked 'MFI-4' (see annexure BHT-1 at page 50). Annexed hereto and marked 'BHT-3' is a true copy of that document; and
(j) [Mr Deliu]:
(i) spoke to Mr Featherby by phone on 26 July 2023 (see annexure BHT-1 at page 12); and
(ii) wrote down on a piece of paper the mobile phone numbers he had stored in his phone for Mr Featherby (being +54 [redacted] and +59 [redacted]), which was marked 'MFI-5' (see annexure BHT-1 at page 83). Annexed hereto and marked 'BHT-4' is a true copy of that document; and
(iii) understood the phone number starting with +54 to be Mr Featherby's current phone number and the phone number starting with +59 to be Mr Featherby's old number (see annexure BHT-1 at pages 82 - 83).
12. The evidence given by [Mr Ball] at the Examination Proceedings on 28 July 2023 included (among other things) that:
(a) [Mr Ball] brought these proceedings at the request and direction of Mr Featherby matter (see annexure BHT-2 at pages 113 and 115 - 116);
(b) Mr Featherby told [Mr Ball] that he would fund [Mr Ball's] legal fees of these proceedings (see annexure BHT-2 at pages 114 - 115 and 118 - 119);
(c) Mr Featherby paid [Mr Ball's] legal fees, by way of funds paid into [Mr Ball and Mr Deliu's] lawyers' trust account, which covered around the first six months of legal costs (see annexure BHT-2 at pages 113 - 114);
(d) on about 22 or 23 July 2023 in Buenos Aires, Argentina, Mr Featherby verbally agreed with [Mr Ball] that he would provide further funding for legal fees in the amount of $200,000 by payment into Kennedy Vinciullo's trust account (see annexure BHT‑2 at page 120);
(e) [Mr Ball] was flown business class from the Greek Islands to Buenos Aires, Argentina to see Mr Featherby, at Mr Featherby's expense (see annexure BHT-2 at page 176), with [Mr Ball's] primary purpose for that trip to see Mr Featherby about Ochre Group matters and the funding of legal representation in the Federal and Supreme Court proceedings (see annexure BHT-2 at pages 117-119);
(f) in his role as director of the Company, [Mr Ball] was advised by, and reliant on, Mr Featherby as to decisions to be made for the Company and [Mr Ball] did not challenge the explanations given to him by Mr Featherby (see annexure BHT-2 at pages 120 to 122);
(g) [Mr Ball] has never met or communicated by phone, email or other electronic communication with [Mr Sumarya] (see annexure BHT-2 at page 116);
(h) the signature purporting to be that of [Mr Ball] on page 5 of the Sumarya DoA was not the signature of [Mr Ball], nor was any of the handwriting on that document [Mr Deliu's] (see annexure BHT-2 at page 170);
(i) [Mr Ball's] actual signature is as written on a blank piece of paper and provided by [Mr Ball] during the Examination Proceedings and marked 'MFI-6' (see annexure BHT-2 at page 158). Annexed hereto and marked 'BHT-5' is a true copy of that document; and
(j) [Mr Ball]:
(i) had last communicated with Mr Featherby around a week prior to his examination on about 22 or 23 July 2023 in Buenos Aires, Argentina, and they communicated with each other verbally over the phone (see annexure BHT-1 at pages 98 - 99); and
(ii) wrote down on a piece of paper the mobile phone number he had stored in his phone for Mr Featherby (being +59 [redacted]), which was marked 'MFI-7' (see annexure BHT-1 at pages 184 - 185). Annexed hereto and marked 'BHT-6' is a true copy of that document.

The defendant's position

On behalf of Mr Nipps, it was submitted that whether or not Mr Sumarya was to attend the substantive hearing of his application, the application was without merit and ought be dismissed.
It was submitted on behalf of Mr Nipps that the most probable inference to be drawn from the evidence is that the deed of acknowledgement of debt relied upon by Mr Sumarya was a sham, and no weight ought be placed on it.[65] In support of this submission, among other things, reliance was placed upon the transcript of the Federal Court examinations of Mr Ball and Mr Deliu, particularly their evidence that neither recognised their signature on the deed of acknowledgment of debt purportedly made by Ochre Group Holdings in favour of Mr Sumarya.[66]
[65] Defendant's submissions filed on 7 August 2023 par 9; ts 31 (15 August 2023).
[66] Defendant's submissions par 9.
As to that part of Mr Sumarya's application made pursuant to s 90‑15(1) of the Insolvency Practice Schedule (Corporations), counsel for Mr Nipps submitted that the evidence provided by Mr Ball and Mr Deliu under oath before the Federal Court made plain that:[67]
(a) such application was brought, effectively at the direction of a non-party, Mr Featherby;[68]
(b) the contention that the liquidation has not been done in a timely manner is inconsistent with the substantial work that the liquidator has done, and has caused to be done;[69] and
(c) the direction is vexatious in circumstances in which the liquidator has been investigating the conduct of, among others, Mr Featherby and Mr Sumarya, in their role and decisions which led to, or contributed to, assets being transferred out of Ochre Group Holdings.[70] On behalf of Mr Nipps it was noted that the liquidators' work had been substantially progressed by the examinations in the Federal Court from 25 to 28 July 2023 and raised concerns about the decisions made by Mr Sumarya.[71]
[67] Defendant's submissions par 10(a) - (c).
[68] Defendant's submissions par 10(a), referencing affidavit of BH Taylor sworn 7 August 2023, BHT-1 pages 18 - 19, BHT-2 pages 113 and 115 - 116.
[69] Defendant's submissions par 10(b) referencing affidavit of JJ Nipps sworn 30 May 2023 pars 73 - 86, 114 ‑ 122; ts 31 - 32 (15 August 2023).
[70] Defendant's submissions par 10(c) referencing affidavit of JJ Nipps sworn 30 May 2023 pars 123 - 125.
[71] Defendant's submissions par 10(c) referencing by way of example the affidavit of BH Taylor sworn 7 August 2023, BHT-1 pages 28 - 29, BHT-2 page 116.
As to the submission that the direction is vexatious, counsel submitted that there was sufficient evidence to ground such an inference being made.[72]

Findings

[72] ts 32 (15 August 2023).

Mr Sumarya's application is premised on Mr Nipps having formally rejected his formal proof of debt, and relief is sought in relation to the rejection under reg 5.6.54(2) of the Corporations Regulations. In considering the application, I was cognisant that the Form 537 (Notice of rejection of formal proof of debt or claim) issued by Mr Nipps to Mr Sumarya and Mr Deliu both contained the same typographical errors at par 1 in that they both refer to the claim made by Mr Ball, and not Mr Sumarya and Mr Deliu, respectively. However, in the disposition of Mr Sumarya's application, I accepted the submission made on behalf of Mr Nipps that when regard is had to the remainder of the notices;[73] the contents of Mills Oakley's letter to Kennedy Vinciullo dated 10 March 2023;[74] and the fact that both Mr Sumarya and Mr Deliu each understood that their proofs of debt had been wholly rejected as their respective appeals makes clear, no implications flowed from the error.[75]
[73] Affidavit of ST Ball sworn 24 March 2023 par 26, SB-16 pages 193 - 194; affidavit of MR Deliu sworn 24 March 2023, MRD-16 pages 192 - 193.
[74] Affidavit of ST Ball sworn 24 March 2023 par 26, SB-16 page 182; affidavit of MR Deliu sworn 24 March 2023, MRD-16 page 181.
[75] ts 56 - 57 (11 September 2023).
I proceeded on the basis that Mr Sumarya had standing to appeal against the rejection and did so within time.[76]
[76] Corporations Regulations reg 5.6.54(2); ts 57 (11 September 2023).
I gave careful consideration to Mr Sumarya's application and to the evidence filed in the proceeding. Having regard to the same, I did not consider the evidence before the court to be sufficient to discharge Mr Sumarya's onus. That is, I did not feel actual persuasion that the alleged debt of $65,000 was a true liability of Ochre Group Holdings.
While there was in evidence the deed of acknowledgment of debt, which on its face was executed as a deed and acknowledges that Mr Sumarya is a creditor of Ochre Group Holdings in the amount of $65,000, the following matters weighed heavily against Mr Sumarya's appeal to revoke the rejection of his proof of debt; and to admit his proof of debt.
First, as Mr Sumarya did not make any affidavit in this proceeding, there was no affidavit in which Mr Sumarya deposed to the circumstances said to give rise to him being owed $65,000, or some other amount, by Ochre Group Holdings.
Secondly, the deed of acknowledgment of debt was not supported by the books and records of Ochre Group Holdings, or any other supporting documents. Indeed, Mr Nipps had not received books and records for the period following Mr Sumarya's appointment as a director on 5 August 2019 to the date of Mr Nipps' appointment.
Thirdly, no explanation was proffered as to the status of the books and records of Ochre Group Holdings, and why Mr Nipps' requests for supporting documentation had largely gone unanswered.
Fourthly, the final Form 520 - Declaration of Solvency did not specify fees or amounts payable to the directors, and no explanation was proffered for the omission.
Fifthly, there was no breakdown in the evidence as to how the alleged debt of $65,000 was calculated and comprised.
Sixthly, the evidence of Mr Ball and Mr Deliu in the course of their examinations casted significant doubt over the veracity of the deed of acknowledgment of debt purportedly made by Ochre Group Holdings in favour of Mr Sumarya.
While it was submitted on behalf of Mr Nipps that the most probable inference was that the deed of acknowledgement of debt was a sham, and no weight ought be placed on it, I proceeded on the basis that I need not make a positive finding to that effect. It was sufficient for the purposes of the appeal to find that Mr Sumarya had not discharged his onus, particularly when the deed of acknowledgment of debt was considered in light of all of the evidence, including the six matters described above.
On the evidence before me, I could not be satisfied that the alleged debt was a true liability of Ochre Group Holdings. If I was incorrect in finding that Mr Sumarya had not discharged his onus, and the correct finding on the evidence was that it was not possible to conclude either way whether Mr Sumarya's proof of debt should be admitted, then the outcome of the appeal would be the same. That is, the appeal would fail and the liquidator's decision stand.[77]
[77] McMillan Investment Holdings Pty Ltd v Morgan [102], citing Kunc J in Re Young (in his capacity as liquidator of Great Wall Resources Pty Ltd (in liq)) [46].
In refusing the appeal, it followed that Mr Nipps was not compelled by operation of s 75-15 of the Insolvency Practice Schedule (Corporations), to comply with the plaintiffs' written direction. In any event, I had concerns as to the reasonableness of the direction in light of the significant work and investigations undertaken by Mr Nipps to date, which suggest that compliance with the direction would substantially prejudice the interests of third parties.
Again, while the evidence before me gave rise to serious questions as to the plaintiffs' conduct and motivations in issuing the written direction, I did not need to go so far as to find (as was submitted on behalf of Mr Nipps) that the direction was vexatious in all of the circumstances. It was enough to conclude that as Mr Sumarya's application to revoke the rejection of his proof of debt had failed, there was no basis by which Mr Sumarya could compel Mr Nipps to call a meeting under s 75‑15 of the Insolvency Practice Schedule (Corporations).
Finally, I note that Mr Nipps sought an order that Mr Sumarya pay his costs with respect to Mr Sumarya's application in an amount to be taxed if not agreed. Having regard to all of the circumstances, there appeared to be no cogent reason why costs ought not follow the event and be awarded in Mr Nipps' favour.

Conclusion and orders

For these reasons, I considered it appropriate to make the orders reproduced at sch A and sch B, noting that Mr Nipps had reserved the right to seek orders against Mr Featherby in relation to this proceeding at a later date.

Sch A - Orders made on 15 August 2023

Sch B - Orders made on 11 September 2023